Net Worth

[kidgas]

Don't know if this is the right category...but here goes:

Just finished calculating the end of 3rd quarter net worth and it was up over 23%. My goal for the next quarter will be to repeat that performance. The plan will be as follows:

Of the needed increase: Over half can be obtained by the investments that already go into 401(k) and 529, repayment of "bad debt" principal (admittedly slowlane, but I do have family -- wife and 6 kids so it is not fair to them to risk it all). Add in a 5% increase of the 401(k) and it looks like I set my goal too low. I would only need to make about a 20% return on the stock collars that I am doing for the quarter, and I think it is obtainable. Let's shoot for 40-50% increase in net worth for the quarter.

 

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[MJ DeMarco]

23% is impressive ... congrats!

 

[kidgas]

Thank you.

 

[randallg99]

this is awesome.

what percentage of that 23% gain in net worth resulted from your stock collar strategy?

 

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[kidgas]

I can directly attribute over 50% (52.6% to be exact) to the stock collar strategy utilized in the business account as detailed in the thread on this site. However, I also utilize collars in my 401(k) and taxable account as well. These also contributed but it is harder to accurately assess since money is constantly being deposited in the 401(k) and the taxable account has money in and out every month.

What collars have done for me in those accounts has been to decrease the overall volatility. As a stock declines, the long put becomes more valuable and the short call becomes less so. It is almost a delta neutral situation. What I do in the 401(k) is use 3 month collars with the goal of obtaining additional return while leaving some room for capital gains. I leave a little more downside with the put and may not sell the call right away if I think there is room to run. For example, I have an Oct put on PAAS but have not sold any calls since I think metals have more upside. I did, however, sell GG calls in case I was wrong. I know that I can't capture all the upside but want to just make money on a consistent basis without losing a ton.

I keep a spreadsheet that I adjust with every trade that follows my "actual cost basis" which is the cost of the stock plus cost of put minus call premium. I can follow the spreadsheet and calculate my maximal potential gain and maximal potential loss. In Feb when the market was down, my actual loss was 1% and maximal was at 6% of the entire portfolio. I am sleeping very well.

I always establish the collars for a credit so that if the stock moves sideways, I still make something. If the stock declines, I will add to the position to lower my overall basis. I did that with STX which I purchased at the beginning of the year in the mid 20's. I sold some of the stake at 28 and bought more when it dropped to the teens. My overall basis ended up being 24 and it sold out in Sept at 25. I ended up making 6.5% annualized on the trade. That's not all that great, sure, but it's not bad considering the majority of the stock was purchased between 27.5 and 28.40. Without collars, I would have lost money and would I have had the confidence to add a little in the teens? I can tell you no. I watched BTU move from 70 to 35 last year. Lost some on that. Money management can be a hard lesson. The put forces me to manage appropriately.

Here is a good article on collars that I really like...hope you enjoy:

http://optionetics.com/articles/article.asp?id=15510

I would be happy to discuss further or answer and questions.