Systematic Covered Writing

...More than just covered calls . . .

Recover After Expiration - The Math Exercise

This SysCW Recover after Expiration  example is intended to illustrate this strategy, which is used each time an option expires worthless. In order to know what to do in the future, it is important to understand what we did in the past.  This is a key strategy used in the Systematic Covered Writing process.  Writers will profit from stocks that appreciate, and they will also generate addition cash with the stocks that lose value or  fail to reach a given strike price by expiration.

Keep in mind that a position is not over . . . until it's over!

Current Examples

RMBS - Rambus Inc.

STRATEGY COMMENTS:  As of May 2007, we are working on the third time the Recover After Expiration strategy has been used. For this stock, the writer has been able to maintain the $22.50 strike price, although with the stock trading at around $18 in June of 2007, it may be necessary to extend the term past three months on the next expiration.

Note that June of 2007 is the one year anniversary of this position.  So . . . just how much has the position generated over the past twelve months?  The answer to that question provides insight as to why the writer does not care that the stock is trading about $4 below the purchase price.

      Systematic Covered Writing      
              . . . More than just covered calls . . .      
    SysCW   Position Tracker    
               
Historical Data Open Position  
        Stock Cash Total Cash Value as of
Date Strategy Status Position Investment Generated Generated 16-Jun-07
16-Jun-06 Initial Stock Purchase Buy 100 RMBS @ 22.349 ($2,244.89)     $1,819.00
  Current Price $18.19 Rambus Inc.        
16-Jun-06 Initial Call Option Sell '07 Jan $22.50 call @ 5.40 Expired 1/19/07 $529.24 Email 6/16  
29-Jan-07 New Continued Position Sell Mar $ 22.50 call @ 1.15 Expired 3/17/07 $104.25    
19-Mar-07 New Continued Position Sell May $22.50 call @ 1.15 Expired 5/20/07 $104.25 Email 3/19  
21-May-07 Continued Trade Sell Aug $22.50 call @ .80   $69.25 Email 5/22  
               
  Cash in Hand 35.95%       $806.99 DA

The goal of Systematic Covered Writing is to be paid for owning stock.  According to the SysCW guidelines, this position is doing quite well, in spite of its loss in value. Comments and or questions are always welcome.   rlcoveru@cox.net

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN RMBS 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 suggesting 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 provide for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.

Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised: 02/23/11