The Recover After Expiration Strategy
January 2006 - Historical records for the shorter term Recover After Expiration strategy begins with the transactions listed below. A number of questions have been posed as to why the 'change of heart' if you will. It is important to understand how and why the adjustment to the philosophy took place. For those that are interested please click WHY CHANGE!
If you have viewed the WHY CHANGE page, then please note the following legend, check out the transactions, and then read the final comments at the end of the data.
LEGEND:
Recovered: The date the stock new call option was sold.
Stock: The ticker symbol for the underlying stock.
Investment: The total net investment in this stock, in this position, in a given portfolio. The reason a given stock may be listed more than once is due to one of the 'in' descriptions. For example, the rows that are green are for positions held in the 100k Portfolio. The investment within a 'position' is the purchase of the stock, and this amount does not change . . . EVER.
New Cash: The net cash added to the account with the sale of the most recent option.
Cycles: Indicates the number of possible times the same transaction could take place over the course of one year. For example, a cycle of 12 tells you that the option has a duration of one month. It could be repeated twelve times a year.
Cash per Year: This is the cash generated with the option (New Cash), times the number of times it could be repeated (Cycles).
% per Year: Is the Cash per Year divided by the Investment expressed as a percentage. Please note the 'could' implied in this statement. We are at a starting point. Mathematically, the larger the cycle number, the lower the probability of success. This does not mean that we will not reach this rate, but rather to be aware that there are strings attached. Subscribers will see together how this works out.
COMPLETED TRANSACTIONS:
| Recovered | Stock | Investment | New Cash | Cycles | Cash per Year | % per Year |
| January 22, 2007 | AMAT | $4,729.00 | $110.50 | 4 | $442.00 | 9.35% |
| January 22, 2007 | CYBX | $21,217.00 | $375.48 | 12 | $4,505.76 | 21.24% |
| January 22, 2007 | IMCL | $6,759.00 | 270.49 | 1.71 | $463.70 | 6.86% |
| January 22, 2007 | INTC | $6,979.00 | $80.48 | 4 | $321.92 | 4.61% |
| January 22, 2007 | NTE | $5,877.00 | $60.49 | 12 | $725.88 | 12.35% |
| January 22, 2007 | OVTI | $4,767.00 | $130.49 | 6 | $782.94 | 16.42% |
| January 22, 2007 | CREE | $5,337.00 | $60.49 | 6 | 362.94 | 6.80% |
| January 22, 2007 | CTXS | $3,470.00 | $76.74 | 12 | $920.88 | 26.54% |
| January 22, 2007 | ELN | $7179.00 | $311.74 | 4 | $1,246.96 | 17.37% |
| January 22, 2007 | GLW | $2,097.80 | $101.75 | 3 | 305.25 | 14.55% |
| January 22, 2007 | NFLX | $2,861.00 | $66.74 | 12 | $800.88 | 27.99% |
| January 22, 2007 | RFMD | $1,483.00 | $110.49 | 1.71 | $189.41 | 12.77% |
| January 22, 2007 | RNVS | $7,394.00 | $86.74 | 2 | $173.48 | 2.35% |
| January 22, 2007 | RMBS | $5,573.00 | $150.49 | 12 | $1,805.88 | 32.40% |
| January 22, 2007 | VRSN | $6,159.00 | $80.49 | 6 | $482.94 | 7.84% |
| January 22, 2007 | DNDN | $3,989.00 | $336.73 | 3 | $1,010.19 | 25.32% |
| January 22, 2007 | OVTI | $5,320.00 | $169.25 | 2.4 | $406.20 | 7.64% |
| January 22, 2007 | YHOO | $9,970.00 | $139.24 | 12 | $1,670.88 | 16.76% |
| January 22, 2007 | CECO | $8,219.00 | $180.49 | 4 | $721.96 | 8.78% |
| January 22, 2007 | CREE | $5,367.00 | $90.49 | 6 | $542.94 | 10.12% |
| January 22, 2007 | CYBX | $7,209.00 | $120.49 | 12 | $1,445.88 | 20.06% |
| January 22, 2007 | CYBX | $12,208.00 | $229.24 | 4 | $916.96 | 7.51% |
| January 22, 2007 | ELN | $3,145.00 | $260.49 | 2 | $520.98 | 16.57% |
| January 22, 2007 | INTC | $2,285.00 | $41.74 | 4 | $166.96 | 7.31% |
| January 22, 2007 | ERES | $3,520.44 | $20.50 | 12 | $246.00 | 6.99% |
| January 22, 2007 | MRVL | $6,485.99 | $60.49 | 12 | $725.88 | 11.19% |
| January 22, 2007 | SNDK | $13,037.00 | $170.49 | 12 | $2,045.88 | 15.69% |
| January 23, 2007 | AMAT | $3,949.00 | $40.49 | 12 | $485.88 | 12.30% |
| January 23, 2007 | CECO | $3,440.00 | $51.74 | 6 | $310.44 | 9.02% |
| January 23, 2007 | CY | $3,359.00 | $80.49 | 12 | $965.88 | 28.75% |
| January 23, 2007 | ELN | $6,161.00 | $87.99 | 6 | $527.94 | 8.57% |
| January 23, 2007 | FLEX | $6,175.00 | $19.24 | 12 | $230.88 | 3.74% |
| January 23, 2007 | IMCL | $4,011.00 | $56.74 | 12 | $680.88 | 16.98% |
| January 23, 2007 | OVTI | $8,812.00 | $205.23 | 6 | $1,231.38 | 13.97% |
| January 23, 2007 | RHT | $2,774.00 | $46.74 | 12 | $560.88 | 20.22% |
| January 23, 2007 | TASR | $7,679.00 | $127.99 | 2.4 | $307.18 | 4.00% |
| January 23, 2007 | TELK | $3,813.00 | $20.49 | 6 | $122.94 | 3.22% |
| January 23, 2007 | CYBX | $2,841.99 | $76.74 | 12 | $920.88 | 32.40% |
| January 23, 2007 | EBAY | $4,059.00 | $51.74 | 12 | $620.88 | 15.30% |
| January 23, 2007 | ELN | $3,767.00 | $50.49 | 6 | $302.94 | 8.40% |
| January 23, 2007 | ERES | $2,992.72 | $40.48 | 6 | $242.88 | 8.12% |
| January 23, 2007 | IMCL | $3,103.99 | $61.74 | 12 | $740.88 | 23.87% |
| January 23, 2007 | MRVL | $4,385.00 | $485.88 | 12 | $485.88 | 11.13% |
| January 23, 2007 | NSM | $2,401.00 | $46.74 | 12 | $560.88 | 23.36% |
| January 23, 2007 | RMBS | $5,813.00 | $130.49 | 12 | $1,565.88 | 26.94% |
| January 23, 2007 | SNDK | $5,177.00 | $111.74 | 12 | $1,340.88 | 25.90% |
FINAL COMMENTS: You should know by now there is no such thing as a 'final comment' when it comes to the covered writer. With this in mind, here are some important mathematical observations. The writer is of the opinion the larger the puzzle, the more accurate or reliable the data. In fact, 'opinion' should be left out . . . for larger samplings tend to provide a more tell tale result.
The Points:
- Number of individual positions - 46
- Average investment in an individual position - $6,268.50.
- Average cash generated per position with the sale of the recent call option - $123.62.
- Average cash generated per year per position - $786.04.
- Average cash generation per year per position - 14.56%
The math is the math. Number 3 had the least real value in terms of observations because the transaction duration varies. In other words this is not a 'monthly' amount, but rather the amount that was generated per position for this month. Line 4 factures in the duration of the call option because the data is averaged against a potential annual amount. (Notice the hedge - potential!). A year from now, we can take the potential off and then talk about the 'past performance is not indicative of future results issue'.
Here is the exciting tidbit . . . note that the only reason we are 'Recovering After Expiration' is because the stock lost value! Each month there are stocks that are assigned . . . you saw a number of them for January. The profit generated for assigned positions is determined when the position is established. It's good to go back to cash with a winning trade.
Reality steps in and we find the other event that can happen, which is the option expirers worthless, but the writer still has the stock. Now . . . based on the assumption that today's activity can be systematically repeated, what if various portfolios could generate close to 15% with what some would call - 'losing' positions?
If you think that is too high . . . cut it in half! If all of the lousy holdings in a portfolio generated 7.27% a year . . . would that be okay? In a nut shell, therein lies the reason for the change in the Systematic Covered Writing philosophy when it comes to the Recover After Expiration strategy.
Your comments, questions, and alternate opinions would be greatly appreciated. After all . . . this Web site is for YOU!
The Covered Writer rlcoveru@cox.net