YHOO - Recover After Expiration

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!

YHOO - Yahoo! Inc.
STRATEGY COMMENTS: Here we take a look at an older position. Take a look at the data and then consider the thoughts below the Position Tracker data.

			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	21-Oct-07
8-Jun-05	Initial Stock Purchase		Buy 200 YHOO @ 36.659	($7,338.80)			$5,806.00
	Current Price	$29.03	Yahoo! Inc
8-Jun-05	Initial Call Option		Sell two Jan $35 calls @ 4.60	Expired 1/21/06	$910.46
23-Jan-06	Continued Trade		Sell two Jul $35 calls @ 3.10	Expired 7/22/06	$610.48
24-Jul-06	Dollar Cost Averaging		Buy 100 YHOO @ 25.99	($2,607.00)			$2,903.00
24-Jul-06	$9,945.80	300 @ 33.15	Combined 300 Share Position
24-Jul-06	Interim Trade		Sell three Jan $30 calls @ 1.30	Expired 1/19/07	$378.23	Link Example
22-Jan-07	New Interim Trade		Sell three Feb $30 calls @ .50	Rolled 2/14/07	$139.24
14-Feb-07	Buy Back & Roll Out		Buy three Feb $30 calls @ .60		($190.75)
14-Feb-07	New Interim Trade		Sell three Mar $30 calls @ 1.25	Rolled 3/2/07	$364.23	Email 2/14
2-Mar-07	Buy Back & Roll Out		Buy three Mar $30 calls @ 1.25		($385.75)
2-Mar-07	New Interim Trade		Sell three Apr $30 calls @ 2.05	Rolled 4/16/07	$604.23
16-Apr-07	Buy Back & Roll Out & Up		Buy three Apr $30 calls @ 1.90		($580.75)
16-Apr-07	Continued Trade		Sell three Oct $32.50 calls @ 2.60	Expired 10/20/07	$769.23	Email 4/16

	Cash in Hand	26.33%				$2,618.85

    The Oct $32.50 calls expired on Saturday, which means the writer can recover the three-hundred shares on Monday October 22.

    The stock closed at $29.03 on Friday, and at this price the Apr $32.50 calls look like they could be sold for $2.05 a share.

    If filled at $2.05, the cash generated by the investment would reach about $3,224 or 32% of the $9,945.80 investment.

    When you look at a portfolio, not every position is going to produce cash at a rate above the SysCW guideline. Some 'trees' are taller than others.

    Now isolate the investment and the proposed activity for Monday, October 22. If the calls can be sold for $2.05, then the investment of $9,945.80 would have generated an additional $605 or about 6%. Keep in mind this equates to 12% annually. Once again the writer is perfectly fine with a $10k investment producing cash at a current rate of 6% for six months.

The goal of Systematic Covered Writing is to be paid for owning stock. According to the SysCW guidelines, this position is contributing towards that goal, 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 YHOO 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