Systematic Covered Writing

    More than just covered calls . . .

Initial Position - The Math Exercise

This SysCW Initial Position was emailed to subscribers on the day the transactions were executed.  In order to know what to do in the future, it is important to understand what we did in the past.

The Email Comments:

HEPH was for the 100k Portfolio as is this new position. This one will be matched up with the existing holding as an advanced Dollar Cost Averaging strategy. The existing holding has a Feb $22.50 call, which the writer will continue to roll until 2008. Then the 200 shares will be traded as a single position.

The Covered Writer

Additional Comments:  As a stand alone position, this is good.  The interesting thought behind this new CYBX position is found in the idea of comparing what was generated with this 100 shares of CYBX by writer a long-term call, versus what will be generated with the older position in the 100k Portfolio. Then comes into play the idea of combining these two positions as part of the Dollar Cost Averaging strategy.  One thing with the shorter term call options is found in the advantage of having more than 100 shares to lessen the effect of commissions and fees. For some firms this advantage is more significant than for others.

As far as the stock . . . if it was worth buying at $40 . . . it's a steal at $20!

 

       
  Systematic Covered Writing
  … more than just covered calls!
                       
                     
  Initial Position:    The Math Exercise  
  Position: 100   CYBX   With   Jan 2008   $20.00   LEAP
                       
  Cyberonics, Inc.     CYBX Jan 2008 20.0000 call    
                       
  Stock Symbol     CYBX   Call Symbol     .LJGAD  
                       
  Stock Purchase Price $20.050   Call Sold Price   $4.30  
                       
  Number of Shares   100   Call Strike Price    20.00  
                       
  Trade Entry Date   26-Jan-07   Expiration M & Y   1 2008  
                       
  Net Cash Generated   $421.75   Net Stock Investment $2,011.99  
                       
  Net Return if Called   $392.76   Annualized  if Called (1) 19.96%   (A)
                       
  Cash Required for Trade    $1,590.24          
                       
  Percentage Recovered w/Option * 20.96%   (B)        
                       
Days Until Expiration & Expire Date   357   18-Jan-08  

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PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN CYBX STOCK OR ANY OTHER EQUITY.  THE INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY.  THERE IS NO GUARANTEE THAT SIMILAR TRANSACTIONS CAN BE EXECUTED IN THE FUTURE. INVESTING IN THE STOCK MARKET INVOLVES RISKS, DO SO ONLY WITH A KNOWLEDGE AND UNDERSTANDING OF THE RISKS INVOLVED!

The information provided above is for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction, investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available on this website may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Always remember that past results are not necessarily indicative of future performance.

These are the terms of use.  Why are they here?  Because the examples provided are real.  The transactions actually took place.  The dates are real, the positions are real.  Some transactions will have been executed on the day you receive the email.  What you are agreeing to, is the fact that in no way is it being suggested that you can, or should, enter a similar position.  Why?  Because that would be providing investment advice and the Covered Writer is not authorized to do that.  There is also no guarantee that similar transactions could be executed at any time in the future. Only licensed brokers are allowed to provide investment advice.  Therefore, you are agreeing that the preceding example was provided for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.

Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2006. All rights reserved.
Revised: 02/05/07