Systematic Covered Writing

... more than just covered calls!

It's About Value

This section of the Web site is not so much about strategy as it is about philosophy.  Specifically, the philosophy of 'value', which is, and should be a concern for investors, and how to handle stocks that depreciate significantly.  This is especially true if the time horizon is short.  Without rewriting the 'Back to Basics' section, it is important to realize that the value of the underlying stock is the one parameter that cannot be controlled.

There are many ways to deal with value.  Some choose to use the stop loss approach where the investor accepts losses as part of their approach.  The SysCW approach is to realize that some stocks will lose value, while other's won't. Both events will happen, and both scenarios will produce extremes.  The purpose of these examples is to illustrate how a covered writer can choose to approach positions that have lost significant value.  It has happened in the past and it will happen in the future.

As always, the examples are provided for educational purposes.  In saying that, also realize that the events took place without the knowledge of the outcome.  Will it always work out?  Probably not, for some companies never recover, but so long as diversification is part of your 'plan', losses should be minimal as long as the time frame is long enough.

The examples will present both historical positions, which may be closed or open, and recent positions, which are being 'traded through' the tough times. We all know how to deal with the winners, it's the losers that challenge the emotions of all investors.

Probably the appropriate cliché to keep in mind is to always like the stock first, then the call premiums. With that in mind . . . please click EXAMPLES to continue.

SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised: 02/05/07