The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success

HOT TOPIC Stock Collars

Remove ads while supporting the Unscripted philosophy...become an INSIDER.

OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana


I thought I would post my excel spreadsheet on my BTU position which I ended up closing today. This makes it a little easier to follow the trades and what happened over time. I initially opened the position on 10/23/2008 by buying 9 March 25 put contracts and 900 shares. I waited a little and sold the Nov 35 calls. You can follow the sequence of events above. Interestingly is that my initial share purchase occurred at a price of 30.81, and I sold today at 30.84. But, in the meantime, I added to my position after taking a profit on the March 25 puts and purchasing a few more shares to lower my basis. Net profit was 3.07 on a 21.75 basis or just over 14% in less than 4 months. I am looking to replace those shares with PCU in the next few days.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

Last edited:
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
February expiration has come and gone so it's time for an update. With the DOW breaking through support and having no idea where the bottom is, I decided to take a defensive position (bent over at waist and grabbing ankles) over the past two weeks and especially the last few days. So here goes:

GG--I ended up rolling out the Feb 30 calls for Mar 30s for a credit just over $1/share. I also sold some Mar 32.5 calls. I do have a few shares left to sell calls on if the stock can overcome the anchor of the general market. With gold nearing highs again, GG is nowhere near its 52-week high. Basis is 26.5. Apr 20 puts.

ONXX--Rolled Feb 30 calls to Mar 30 and sold Mar 25 calls yesterday. Don't like the action. I can always keep rolling out if ONXX rises. Have May 25 puts for protection. Basis is 34.56. Got some work on this one.

EMC--Sold Feb 11 puts yest for a few pennies. Sold Mar 10 calls on half the shares (defensive stance). The Feb 12 expired freeing up the other half. Will look to sell calls on those in the next week. Basis is 17.06. Work on this needed, too. Apr 9 puts still holding.

PCU--I have delayed hopes of any significant economic recovery for much of 2009. Took a defensive stance by selling Mar 12.5 calls with Jun 12.5 calls for protection. Just looking to take advantage of time decay for awhile. Basis is 15.94. Got work.

DRYS--I have been gradually selling out some of my Mar 2.5 puts at a slight profit to decrease my overall amount invested since I don't see bankruptcy in this one for the next month with BDI rising and the bank agreements in place. Again, the defensive play is to take advantage of time decay while I wait for a recovery. I believe inflation will return just not sure when. I also sold some Mar 2.5 calls on some of the positions. The Feb 15 and Feb 5 calls are expiring worthless. Will look to sell more Mar 5 calls gradually over the next few weeks. Basis is 18.76. I have plenty of Mar 2.5 puts and would actually do better if DRYS went bankrupt before then.

FAS--Holding Jul 7.5 and 5 puts which are ITM now so my loss is defined. Trying to take advantage of time decay. Bought back all calls yesterday and will sell again on any near term spike. Basis is 10.04. Gotta go.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Half way through the month with 2 weeks til expiration. Over the past few weeks, I have assumed a very defensive position trying to raise cash and limit overall exposure. For the individual positions:

GG--Market in general seems to be dragging this one down plus now the gold price has fallen away from the $1000 level. I ended up selling Mar 30 calls on all shares to begin raising cash since in April, I will need to think about my next steps. Basis is currently 25.84 but no shares are available to write calls on. I plan on selling Apr 30 calls in two weeks or rolling out if necessary.

ONXX--Bought back a few of the Mar 30 calls. Still have the Mar 25s on half. Holding May 25 puts for protection. I will need to keep rolling out to chip away at the basis. Currently it is 34.98.

EMC--Sold Mar 10 calls on the rest of the position. All shares have Mar 10 calls and Apr 9 puts. Looks like a trading range for some time assuming it doesn't go lower. Basis is 16.75.

PCU--Will likely roll out to Apr 12.5 calls a few days before expiration unless the stock is above 15. Then I might roll out and up. Basis remains 15.94.

DRYS--I purchased additional shares at basis of 2.10 and 2.15 by doing a buy-write. I already had plenty of puts at 2.5 for March so the profit was already built in. I have purchased some Apr 2.5 puts already and will consider rolling out some Mar 2.5 calls or rolling out and up to the Apr 5s. I keep waiting for earnings to see what happens, but it hasn't happened yet. The BDI is well off the lows. The iron ore contracts should be negotiated shortly as well. Just waiting to see ultimate direction. I do have some shares available to participate in any bullish outcomes. Basis is 14.69 but that will change in the next few weeks.

FAS--Just trying to take advantage of patience. I sold Mar 4 calls on all shares. I am working to get the basis below 7.5 by July so those puts are exercised at a guaranteed profit. Then I will keep working from there. Need to get a 33% pop in next 2 weeks before I have to worry about those calls getting exercised. Unlikely in my opinion. Then I will sell either Apr 4 calls or Apr 5 calls pending the action. Basis is now 8.84. I only need to get 1.34 in premiums over the course of 4 months or 0.335/share each month. Certainly seems doable at this point.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
WOW!! Quite a lot of action in the markets the last 2 weeks. Just thought I would throw out a quick update since a lot has changed in such a short period of time.

GG--It looked like gold was getting hammered today, so early this morning I bought back the Apr 32.5 calls that I had sold for half price. I still have some Mar 30s outstanding. Well, what a difference the Fed makes. I will plan on selling those Apr 32.5 calls again tomorrow for about 50% more than what I originally had provided the price of gold holds. I will also roll out the Mar 30s to Apr 30s on half and keep some shares uncommitted for the next week or so in case the gold rally is more sustained. Current basis is 25.63.

ONXX--Rolled out the Mar 25 calls to Apr 30. I still have a few Mar 30 calls that I am watching since the stock is hanging out close to that strike. The new basis is 36.47. I have another month (May) to chip away at the basis before having to purchase new puts. I am leaving some room for upside since I still view ONXX as a potential takeover target. I would like to see the Mar 30s expire which would leave half the shares available just in case. However, I would have to sell over 42 or so to garner some profit. I would like to get to the May calls first.

EMC--Bought back the Mar 10s and rolled up and out to some Apr 11s and Apr 12s. That did increase the basis, but closed the gap between the called out price and the basis. Thus, I made some progress. The new basis is 17.35.

PCU--Ended up rolling up and out of my defensive position. Now I have Jun 12.5 puts and Apr 15 calls. Need to do another roll or two to work my way into a profitable position. The basis is 17.33. Not much to do on this on for the next four weeks.

DRYS--Just waiting to get called out of some Mar 2.5s. I would like to sell some Apr 5s for additional cash for the account but DRYS has not participated in the rally since the BDI has dropped over 10% in the last few days. Oh well, patience.

FAS--Well, I didn't see this one coming. The rally has been incredible. I bought back the Mar 4 calls and rolled up to Mar 6 calls. Now, it looks like I will have to roll out to Apr. I don't know if I will roll up or not. Looking at the numbers, it looks like I can roll to Apr 6s with 2/3s of my shares which would make the repurchase of all the Mar calls zero cost. I would then have one-third of my shares able to participate in any further rally. I would look to sell Apr 7.5s or 9s and begin staggering my rolls. I have until July to work on this one. Basis is now 10.11.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Expiration has come and gone...time for an update.

GG--Sold the Apr 32.5 calls as planned. I also sold 200 shares at 34.07 on Friday so I could afford to buy some Apr 32.5 puts on 3/4 of my shares to lock in a profit. I still have a few shares to participate in a rally, plus Apr 35 calls that could get called also. I just don't know that the gold price has what it takes to break through $1000 again in the near-term. Either way I can benefit. New basis is 27.18.

ONXX--Have Apr 30 calls outstanding already and half the shares uncommitted. Hoping for some rally to sell some more Apr 30 shares. Might consider May 35s if I can get a good price. Just need to chip away at the basis of 36.47.

EMC--No change from last entry.

PCU--No change.

DRYS--Got called out at 2.5. Remember I had all those puts so did a buy/write at 2.10 and 2.15 so I made some small profit on those shares. Now I have Apr 2.5 puts and have sold a few Apr 5 calls. Will continue to sell in increments on any up days. Basis is now back over 20 at 20.84. I anticipate I will be able to bring this down over the next several months.

FAS--Screwed this one up (got greedy). I bought back some Mar 6 calls on Wed and put in an order to sell Apr 6 calls that didn't get hit. I should have sold that day (I should know better). Anyway, I did have some Mar 6 calls that expired worthless. Now I have no calls and Jul 7.5 and Jul 5 puts. At least the puts became more valuable. I will watch this week for a rally (even for one day) and sell some Apr calls. Another opportunity to learn from my mistake. Basis is 11.05.

I think this upcoming week will be interesting to see what happens with the commodities, financials, and market in general.
 

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
made a 12% trade on DRYS in previous 2 sessions.... original intentions were to make 10% and keep through earnings but nobody went broke making profits so I sold yesterday afternoon

earnings were impacted by world economy but Economou is apparently savvy at raising capital.... losses are mostly non-cash and dRYS shows a significant profit is made after the dust is settled. but I've said before that trusting the shippers is bad for your health.

not a stock for the faint of the heart, pretrading is back in the mid 4's after being in mid 5's yesterday where I sold.

from the site (link is below)

For the fourth quarter of 2008, the Company reported a Loss of $1.02 billion or
$18.42 per share. Included in the fourth quarter results are a non-cash loss of
$700.5 million or $12.68 per share related to the impairment of goodwill
associated with the acquisition of Ocean Rig ASA, a loss related to contract
termination fees and forfeiture of vessel deposits of $160.0 million or $2.90 per
share, a non cash loss of $177.0 million or $3.20 per share associated with the
valuation of the Company’s interest rate swaps , a loss on the sale of one vessel of
$3.0 million or $0.05 per share, amortization of stock based compensation of $9.5
million or $0.17 per share and a gain on the contract cancellation of one vessel of
$9.1 million or 0.16 per share . Excluding these items, Net Income would amount
to $23.5 million or $0.43 per share.

Ø For the year ended December 31, 2008, the Company reported a Loss of $361.3
million or $8.11 per share. Included in the year ended December 31, 2008 results
are a non-cash loss of $700.5 million or $15.71 per share related to impairment of
goodwill associated with the acquisition of our wholly-owned subsidiary Ocean
Rig ASA, a loss related to contract termination fees and forfeiture of vessel
deposits of $160.0 million or $3.59 per share, a non cash loss of $207.9 or $4.66
per share associated with the valuation of the Company’s interest rate swaps , a
gain on the sale of eight vessels of $223.0 million or $5.00 per share, amortization
of stock based compensation of $31.5 million or $0. 71 per share and a gain on the
contract cancellation of one vessel of $9.1 million or 0.20 per share. Excluding
these items, Net Income would amount to $506.2 million or $11.35 per share.




http://www.capitallink.com/ppress/ppressfile/23406845/dryspr032409.pdf
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Randall,
Congrats on the profitable trade. As you know, I view my involvement in DRYS as a speculative play on a rebounding economy. At least with the latest earnings announcement, I feel less likely that DRYS could slip into bankruptcy. They still have lenders to negotiate with, but I suspect a precedent has been set not only with DRYS but other bulk shippers.

I saw a report on the Hellenic Shipping News site that DRYS could end up being debt-free within 3 years. The supposed source was Forbes. I could not re-locate the information, however. I would have liked to post the link. Not sure what to think about that.

Anyway, thanks for the information. I saw the report but haven't had much time to digest all of the quarterly or annual information. I found it interesting that DRYS was up Friday with the uninspired market, sagging BDI, and no apparent news. I must not be faint of heart...probably just lack the common sense to know any better.:D
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
There is one week left until expiration Friday (5 trading days to go). I am taking some time today to digest the recent activity in the market and plan my strategy going into May.

GG--Good thing I picked up those puts when I did. Currently, it looks like they will have some value. I think that this next week I will sell the Apr 32.5 puts and use the cash to purchase Oct 25 puts that cover my entire position in GG. I will then sell May 30 calls on any currently available shares to add to my cash position and allow the Apr 35 and 32.5 calls expire worthless. On any significant spike, I will look to sell May 32.5 calls to raise more cash. My current basis is 27.18. It won't change much with the above adjustments, and I will have put protection until Oct with only a minimal amount of the value at risk. That at risk amount will dissipate as I sell calls during the summer months.

ONXX--I bought back some of the Apr 30 calls but still have a few outstanding. I purchased some May 25 puts already. I am looking to sell some May 30 calls if the stock gets close to 30. Ideally, I could sell them for about 3/share on half the position lowering the basis by 1.50/share overall. Will see what happens over the next week. Basis is currently 36.77. Still have some work and patience required to lower the basis.

EMC--Bought back all the calls yesterday and purchased some Oct 10 puts since the Apr 9 puts are pointless now. I sold some May 13 calls and still have some shares on which I could sell calls. The basis did increase but I have til Oct to chip away at it. Also, I theoretically purchased 2 dollars equity (call from 11 to 13) for 1 dollar net. Will see which direction this heads. I haven't decided whether I want to sell May 12s, 13s, or 14s. It depends on the direction of the stock and the market. Basis is now 19.24.

PCU--I am feeling better about this one now. I bought back the Apr 15 calls and sold the May 20s. Basis is 20.36. Ideally this will stay close to its current price, and I can sell the June 20s leading into the expiration of my Jun puts. Then, I can look at the next put level going forward. I screwed up initially on this one so it is taking some effort to turn this around, but I am learning from my mistakes.

DRYS--I will have to look into purchasing some May puts this week. I am considering either 2.5s or 4s. Then, I will sell calls on about half the shares. The Apr 5 and 6 calls are OTM. It is difficult to know if things will remain that way. I will sell May 5s on any spike to raise cash to repurchase the Apr 5s if needed so that cash outlay will be minimal. Just have to see how this plays out. Basis is 18.36. Another one where I made some mistakes early and am working to correct and learn what I can do in the future.

FAS--Quite the volatility. I have Apr 5, 6, and 7.5 calls. I will need to repurchase and roll out. I would like to roll up to some extent as well but would like to minimize the cash cost since this ETF can fall substantially as well as rise. I will probably roll the Apr 5s to May 6s, the 6s to 7s, and the 7.5s to 8s. It looks like the first roll will cost a little, the second can be done for even money, and the last for a slight credit. I think the net effect will be a slight decrease in my overall basis of 9.56. Repeat the process going into June and July, and I just might wind up with a profit. Have to see what happens.

PS--On the side account: I have positions in DRYS with a basis of 8.40/share. I have Sept 5 puts and am just trying to chip away at the basis between now and then to et it close to 5/share. To do this, I need to pick up about 0.70/share each month between now and then. If I see a little spike in DRYS this next week, I will sell some calls. I have Apr 5 calls outstanding plus lots of uncommitted shares as well.

I also initiated a position in CHK. I started by purchasing Oct 15 puts, purchasing shares, and selling Mar 15 calls. As the stock has increased, I purchased more puts at higher strikes, more shares, and sold more calls. I even rolled those original Mar 15 calls into Apr and now May 17.5 calls. The net effect is that I have Oct 15, 17.5, and 20 puts with sold May calls of 17.5, 19, 20, and 21. The basis is 19.8 so those Oct 20 puts have locked in a profit on that group of shares and all I need to do is roll out month to month collecting additional profit. Ultimately, that is where I would like to get with all my stocks. It will take some time, but I think it is doable.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Brief update on a few changes:

GG--Oct puts were a little expensive for the cash in the account. I decided to go with July 25 puts instead. Sold the Apr 32.5 puts for more than I paid for them. Also sold a few May 30 calls. Now I will just wait out the week for the Apr 32.5 and 35 calls to expire and raise cash by selling May calls on any spikes. Basis is now 26.61. My goal is to decrease the basis to under 25 by July expiration.

FAS--I bought back all the calls (Apr 5, 6, 7.5) and ended up selling May 7 calls and May 9 calls. The basis increased from 9.56 to 9.97. It turns out I was a little more aggressive than I had planned; however, I feel that I have some room for a pullback especially with the 7 calls. My aggregate selling price on the calls increased from 6.42 to 8. Obviously a lot depends on what happens with bank earnings this week (doesn't it always), but anything less than disaster may lead to more and more short covering.

I made no other changes today and feel OK with my positions. I continue to learn each day and am thankful for the opportunity.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
As always, it has been a fun week in the market. Option expiration has come and gone, so time to update and look ahead to the third Friday of May. Spring is coming and the links are calling. Should we sell in May and go away? Only time will tell.

GG--Gold taking it on the chin the last week. I have July 25 puts on all shares. The April 32.5 and 35 calls expired worthless. I will look to sell some more calls this week on any significant positive moves. Have a few outstanding May 30 calls which are sitting on 70% gain. May buy those back if GG keeps declining. Just need to be patient. Basis is 26.61.

ONXX--Have May 25 puts from earlier. All calls expired. Waiting for ONXX to increase to about 27 and then will sell some May 30 calls. Still have lots of work to decrease the basis from the current 36.77.

EMC--Have Oct 10 puts so won't have to purchase puts for awhile. Sold some May 13 calls. Have an order to sell more. Will give it a week or so to see where the stock is headed. Basis is 19.24.

PCU--Have June 12.5 puts and May 20 calls. Will let this one get closer to expiration and then roll to June. Basis is 20.36. I have a lot of downside to the June 12.5 puts, but am taking some chance since I made a mistake on this one by not selling the calls straight out of the gate and then got scared. But I appreciate the opportunity to learn and improve.

DRYS--I ended up buying June 4 puts so I would not have to spend again in May. I bought back the outstanding April 5 calls on Thursday before the big run on Friday. I did have to buy back some April 6 calls on Friday but that was OK. I now have some May 6 calls outstanding as well as May 7.5 calls. I also have about 40% of my shares available to sell future calls. I would be looking at the May 9 or 10 depending on what happens this next week. If I do sell, I would probably buy back some of the May 6 calls and roll those up. Basis is 18.84.

FAS--This past week, I ended up selling some of my shares and selling the corresponding July 7.5 puts to lighten up on the position. I had previously repurchased some of the calls. The combined selling price for the shares and puts was higher than the overall basis, so the basis of the remaining shares went down slightly. I now have July 5 and 7.5 puts and outstanding May 7, 9, and 10 calls. I will sit for several weeks and roll these as appropriate going into June. Basis is 10.26.

PS--Side account: No change in CHK. As above, I managed to buy back the April calls on Thursday. I sold May 6 and May 7.5 calls on Friday. I still have half the shares available and will watch the movement this week. I still have until September with the puts. Basis is 8.02. This one is looking better. I am seeing the light at the end of the tunnel.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
I've noticed a lot of new members recently, so I thought that I would place a little tutorial at this point in the thread since I know it takes quite a bit of time to read back through multiple posts and glean the important tidbits.

Before one can understand stock collars, one must understand some basics regarding options. An option is a contract between two parties. One party agrees to sell something for a set price (called the strike price) between now and some date in the future (expiration date). Options are derivatives which mean that they derive their value from the ability to conduct a known transaction. That value is known as premium. Option contracts can exist for real estate, stocks, currencies, commodities. I could even write an option contract on my baseball cards if someone would buy it. I choose to work with options for individual stocks (currently GG, EMC, DRYS, PCU, etc)

Now there are two types of option contracts: calls and puts. A call gives the holder of the call the right (but not the obligation) to call up the holder of the underlying stock and buy it at the strike price anytime before expiration (which is American style--European style can only exercise on expiration day). A put gives the holder of the put the right (but not the obligation) to put (or I like to think of it as stick it to) the stock to the writer of that contract anytime prior to expiration. An option contract is typically written for 100 shares of stock and will only be modified for things like stock splits, special dividends, etc.

Now the writer of the call or put contract is obligated to live up to his/her end of the bargain. You can think of puts as insurance policies for stocks. If I buy fire insurance and my house burns down, the insurance is obligated to replace it according to the terms of the contract. They write the contract to collect and keep the premiums, taking the calculated risk that a recurrence of the San Francisco fire won't happen. The same is true with options. The writer of the calls and puts gets to keep the premium whether or not the contract is ever enforced. The writer has to evaluate the risks and determine whether or not it makes economical sense to enter into such an agreement.

There are a few other terms that you should know: at-the-money (ATM), in-the-money (ITM) and out-of-the-money (OTM). When speaking about "the money", the comparison is between the market price of the underlying and the strike price. For example, if IBM is trading at $100/share then the 100 strike price is ATM. This is true for both calls and puts. Now for the 95 call, that option contract is $5 ITM which means that the holder of the contract can call IBM at 95 and sell at 100 in the open stock market. By contrast, the 95 put is OTM. Why would I put the stock to someone for 95, when I can sell in the open market at 100? So, if a strike price for a call is ITM, the put at the same strike is OTM and vice versa.

Finally, let's talk about the components of value of the option contract. The contract only has value if it is ITM or has time remaining prior to expiration. If the contract is expired, it has NO value. It is an invalid contract. Going back to the IBM 95 call. Say it expires in May. Stock option contracts expire on the third Saturday of every month but since the option market isn't open past 4 pm Friday, the third Friday of the month becomes the effective expiration time. So, the May expiration is two weeks from today. So, the IBM May 95 call may have about $1/share in time value. Over the next two weeks, IBM can move up or down which will impact that $5 ITM or intrinsic value. As time passes, the time value will decrease (more on this in later posts) and the intrinsic value will fluctuate based on the trading in IBM stock. If IBM increases to 106, then the intrinsic value of the 95 call becomes $11 per share.

Next time, I will discuss covered calls and protective puts.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
So, now I discuss protective puts and will follow up with a discussion on covered calls.

A protective put is just as it sounds. It is a put option that you own to protect stock that you own. It is like an insurance policy. If I own 1000 shares of IBM stock, and I am worried about an upcoming earnings announcement, I could by 10 put contracts (100 shares per contract = 1000 shares) to protect my IBM stock against a sudden and severe downturn related to the earnings announcement.

This is opposed to just buying puts for the sake of speculation that a stock might decline like you would when you short a stock.

Now why not use a stop-loss order? I will tell you why I don't like a stop-loss order mental or otherwise. Say IBM is trading at 100 with earnings coming up. I purchase my 95 put contracts and Joe enters a stop-loss order at 95. After the market closes, earnings are just terrible and revenue is down 25%, there is a class action suit announced, and the CEO is killed in a plane crash during the conference call. The next day IBM opens at 60. Guess what? I will get 95/share when I exercise my puts. Joe will get 60 when the market opens. A stop-loss will not protect you from a gap down. Since most major stock moving events (either up or down) occur after hours or pre-open, a stop-loss isn't going to protect you. Yes, it will protect you from a steady decline but so would a put. That is why I prefer protective puts.

Now on to covered calls. Several stock market "gurus" will advocate covered calls as a way to make additional income on stocks that you are holding or purchase for that purpose. Remember that a call gives the buyer the right to call the stock away for the strike price. The seller of the call is obligated to fulfill the terms of the contract. If I write a contract (meaning I am the seller), I am obligated to perform. If I own the shares about which the option contract refers, then I am already covered if the shares get called. Hence, I have written a covered call.

For example, I own the 1000 shares of IBM stock. From today's close, IBM closed at 106.19. I could sell 10 contracts of the June 110 IBM call for $2.45/share. That means I would get $2450 - commissions in my brokerage account and would keep that money regardless of what happens to IBM stock between now and the third Friday of June. That is the way that you can earn extra income from stock that you already hold or purchase for writing calls. Do this 5 or 6 times per year and the money can add up.

But, there is a downside to managing and writing a covered call portfolio (and I have personally experienced this). You are essentially doing exactly the opposite of what you should be doing to make a profit in the market. You are keeping your losing stocks (letting your losers run) and letting the winning stocks get called away (cutting short your profits). So you end up with a portfolio full of losers. If IBM goes to 150, I am stuck selling it at 110 with only a profit of only 6.26/share (2.45 for the call premium and 110-106.19). But, if IBM drops to 90, I only tempered my loss by 2.45/share. Big deal. I probably should have sold sooner, but I would have had to buy back the call and then sell the stock. That is why I don't like covered calls.

Next time, I will talk about the stock collar which is essentially the protective put and the covered call combined. I will explain what I like about it, what the pitfalls can be, and how I am using it.
 

biophase

Legendary Contributor
EPIC CONTRIBUTOR
FASTLANE INSIDER
I've Read UNSCRIPTED
Summit Attendee
Speedway Pass
Jul 25, 2007
7,098
32,962
5,083
Scottsdale, AZ
Now why not use a stop-loss order? I will tell you why I don't like a stop-loss order mental or otherwise. Say IBM is trading at 100 with earnings coming up. I purchase my 95 put contracts and Joe enters a stop-loss order at 95. After the market closes, earnings are just terrible and revenue is down 25%, there is a class action suit announced, and the CEO is killed in a plane crash during the conference call. The next day IBM opens at 60. Guess what? I will get 95/share when I exercise my puts. Joe will get 60 when the market opens. A stop-loss will not protect you from a gap down. Since most major stock moving events (either up or down) occur after hours or pre-open, a stop-loss isn't going to protect you. Yes, it will protect you from a steady decline but so would a put. That is why I prefer protective puts.
What about the potential cost of the put vs. no cost of a stop loss?

If IBM goes up to 110, Joe revises his stop loss to 105 at no cost. What do you do with your puts at this point? Do you buy them at 105 and sell the 95? Also, how far out do you purchase your puts?
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Bio,
First of all, let me say that my general preference in investing is to avoid a big loss. Just today, Garmin (GRMN) gapped down from 25.66 to open at 23.81 and within 30 minutes was trading under 22. What good is an 8% stop loss at that point? At the close, GRMN was down 3.83 at 21.83 and the May 25 put was up 1.85 to close at 3.30. So again avoiding the big hit is my main priority since a 50% loss on your portfolio requires a 100% gain to get back to even. Even index investors got crushed this past year.

So, while there is no immediate of pocket expense to a stop loss, there is a cost which can be significant. This is true of any choice that is made since one can always discuss opportunity cost, etc.

However, you bring up an important point which I will discuss in more detail when I talk about collars. There is a cost to the put which could get quite expense over time as they expire and you have to renew them. That is the whole point of selling calls--to pay for the puts. But, you do limit your upside profit potential. Ultimately, it becomes a trade-off and you have to decide if you want more protection or more profit potential.

In the IBM example, I would sell the 95 puts and purchase the 105 puts. Depending on your purchase price and overall basis, you may have locked in a guaranteed profit. For a personal example, I have been buying DRYS in an account since last August. This is the "side account" I refer to in my other posts. My first shares purchased last August were on 8/5/2008 at 65.25/share. I added on 8/18 at 78.30/share. I purchased puts and sold calls along the way. As the stock declined, my puts became very valuable and I sold them for cash and added to my position. I did not know when the stock would turn around. Had I known everything would have turned out the way it did, I may not have bought that stock. But that is why we invest. We assume risk in exchange for some profit and evaluate risk vs reward. But, what I did know is that there was a maximal loss to me. It turned out that it was anywhere from 12-18%. I could live with that. I could sleep nights. My retirement account is likewise protected with puts. There came a point in March when I hit a floor. My loss was at its maximal point. My stocks kept decline but the value of my account was unchanged because my puts were ITM and rose almost as much as the stock declined. Couple that with the declining short calls and my account value was essentially static. I slept just fine. That is why I am using collars. They make a darn nice pillow.

I usually try to purchase my puts 3-6 months out to get a sense of the trend. Plus the increased incremental time costs less overall. Although if I don't want to spend a lot of money (or don't have the cash), I may only go out 2 months. It really depends. Some of the puts are OTM, some are ATM. I have recently begun purchasing ITM puts as well. Occasionally, I will purchase a put one or two weeks out because of concern over earnings. I even bought a put on Thursday that would expire the next day because of earnings. It didn't cost a lot and the increase in the stock was greater than the cost of the put, but if things didn't work out, I was protected.

PS--Back to the "side account". I bought some more shares of DRYS and bought the Sept 11 puts for those shares. I also sold May 11 calls on those shares. My overall basis for all the purchases of shares, selling of calls, purchasing and selling of puts and commissions is 9.10/share. So, no matter what happens those shares are profitable. I will sell calls on those shares in June, July, August and September for the sole purpose of increasing profit. Right now I have some June 9 calls outstanding and more June 10 calls outstanding as well. I will roll those out to July and then to August and September as well to decrease the basis or capture equity as I sense the market and stock trends. I have a few shares that are "open" as I like to think of them. That means I haven't sold any calls yet and can sell them outright or sell calls to raise additional cash. And when August 5th happens, I will be able to see what one year's worth of trading in DRYS stock and options has yielded me. I can say that I have appreciated the learning experience.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
In this post, I would like to discuss the stock collar. I would also like to explain what I like about it, how I am using it, and what the pitfalls might be.

If you have understood the protective put and the covered call, then you understand the stock collar. A collar is simply a long stock position coupled with a protective put and a covered call which pays for part or all of the put. If we go back to the IBM example and use numbers from today's close, we could buy IBM for 102.90. We could then buy the June 100 put for 2.80/share and sell the June 105 call for 2.80/share. This would be considered a zero-cost collar since the premium received for the call offset the cost of the put. Now, what does this mean? It means that if IBM is trading at 80/share on the third Friday of June, we would sell it for 100. Our loss is 2.90/share regardless of what happens to IBM stock. Conversely, if IBM is trading for 140/share on that same Friday, we would only get 105. Thus, our gain is limited to 2.10/share regardless.

Pitfall #1: Limited upside potential. This is the same as with covered calls, but at least the downside is limited as well.

The way that I have been using collars is primarily in my retirement account. I have been using them to limit the downside risk and protect capital and to attempt to generate some income as opposed to investing with the desire to score the next hot stock and big gain. For me, it is a defensive long-term posture that allows me to know that I have protection in place during those times when I can't monitor my account. This is what I really like.

I think my biggest problem with the collar in my retirement account thus far has been my bullish bias in a bear market. Some of the puts were lower strikes and so offered less protection. I also would sell calls on only a portion of my shares leaving some room for upside. Needless to say over the past 8-9 months, there has been no upside. So, I could have done a better job of indentifying the trend and positioning myself accordingly. I don't think it is a problem with the collar, but my management. Despite that, my loss was 18.2% which would be nothing to sneeze at.

Lately, I have been buying puts a little farther out on the calendar and then using the calls to pay for the puts over time. It seems to me that this would be an improvement vs. buying new puts each month. This is what I am referring to when I am trying to chip away at the basis. Each month I am trying to pay down the cost of the put so that over the course of a few months the difference between the overall basis and the current price of the stock is decreasing.

Please feel free to ask any questions. I will provide a little update in a separate post.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Brief update with 4 days til May expiration. I will probably provide more detail after expiration.

GG--Have July 25 puts. Outstanding June 28, 32, and 35 calls plus some open shares. Basis 26.08

ONXX--Now have Aug 22.5 puts. Outstanding June 25 calls on half the shares. Waiting for run up to sell some June 30 calls. Basis 36.27

EMC--Oct 10 puts on all shares. Outstanding June 13 calls and May 13 calls which might very well expire. Then would sell more June 13s. Basis 18.95 which should be nearing 16-17 by October.

PCU--June 12.5 puts. Have May 20 calls outstanding. Could go either way. Will decide on Wed whether to roll or see what happens Friday. Will not have market access during day. Basis is 20.36. Should be able to roll for about .80-.90 credit.

DRYS--Have June 4 puts. Buying back some calls on pullback. Still have outstanding June 7.5, 9, 10 calls. Plus open shares. Basis 19.92. Will sell calls on any bounce.

FAS--July 5 puts. May 9 calls and June 10 calls. Bought back some May 9 calls today. Will watch with the others. Waiting to roll vs watch more. Basis 11.57.

Side account--DRYS basis 9.29. CHK basis 21.58.

I will have more time for detail this weekend.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Option expiration has arrived. There are now 5 weeks until the third Friday of June. Here is an update.

GG--Still have outstanding June 28, 32, and 35 calls. But with the recent spike in gold prices, I took the opportunity to purchase a few June 35 puts creating a conversion with the 35 calls. So, no matter what happens over the next five weeks, I will sell some GG shares at 35. With a basis of 26.61, that is some guaranteed profit.

ONXX--No changes. I still have those Aug 22.5 puts. The May 30 calls expired worthless. I will watch what happens but may sell some more June 25 calls to raise cash in the account while I watch this stock.

EMC--The May 13 calls expire today. I will sell either June 12 calls or June 13 calls. Still have plenty of puts.

PCU--May 20 calls will expire worthless. The question is whether to sell June 17.5 or 20. I will likely hold this past June so will have to buy additional puts in June.

DRYS--No changes this week. Will consider selling more calls in the next week to raise cash in the account.

FAS--Bought back some calls this week. Waiting for a little rebound to sell them back.

Side account--Buying back calls on CHK with the decline. Also sold some shares and puts for a net 25.25 to lower basis. Also with DRYS, bought back some calls on the decline and sold the Sep 11 puts and shares for a net 12/share lowering basis.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
It's been awhile since I updated. I have been busy working on articles over at Hubpages and generating content. I am having some fun and learning a lot. Feel free to check some of them out and comment. Anyway, option expiration was today so I thought I would comment on my positions.

GG--Sold some shares at different points on the way up and bought some Jun 40 and Jun 38 puts which I subsequently sold at a profit on the way back down. Sold some shares at 35 today when those Jun 35 puts were exercised. Will repurchase those shares hopefully at 32.80 with a buy-write using July 35 calls. Will see what happens.

ONXX--Bought back some Jun 25 calls. Will sell July 25 calls in the near future.

EMC--Bought back Jun 13 calls and sold the July 14 calls for slightly higher price booking a cash profit. Now have room for more gains.

PCU--Bought Sep 20 puts and bought back the Jun 20 calls. Will sell some more calls on the next spike upward.

DRYS--All calls expired worthless. Jun 4 puts expired and were replaced by Sep 5 puts. Will need to sell some calls soon for more cash.

FAS--Bought back 25% of the Jun 10 calls. The others expired worthless. Need to wait for this to rise and will sell the July 10 calls. Trying to get out of this soon.

I will have to update my data so that I can get basis information with the next update. Just wanted everyone to know I was still alive.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Well, option expiration was this weekend so I thought I would provide a brief update. I have been busy working on creating articles for HubPages so I haven't been as active with writing updates, but that's OK. I am having fun and have made $8 with Adsense which has been exciting for me. It is a blast creating something out of nothing. Feel free to stop by and check out some of my articles. I would certainly appreciate it. On to the update:

GG--It has been some up and down with this one. I think it has worked out to my advantage. As mentioned above, I sold puts for profit and actually picked up a few more shares at $32.50. I would have loved to buy more but I had to save cash to buy puts since I had July puts. Now I have October 30 puts and have sold some Aug 38 calls. I still have some shares on which to sell calls and my basis is 29.44 so I have guaranteed profit come October. It is great to work with this account since I am no longer putting in any cash and can get an easy sense of the value changes over time.

ONXX--Had to buy back the Jul 25 calls and sold some Aug 30 calls last week. I have Aug 22.5 puts so I will have to replace those next month. Still have half the shares available to sell calls on with any rally. Basis is 36.53 so I still have some work to do.

EMC--This one is working great. You saw that I bought back the 13 calls and sold July 14 calls for a net credit. Those 14 calls expired this weekend and EMC closed at 13.92. The futures are looking pretty good at 1:30 this morning. I plan on selling the Aug 15 calls sometime this week possibly as early as Monday. Earnings are due this week. I may split the shares in half and sell half the calls at 15 and the other half at 14 or 16 depending how earnings and the market look. Basis is 18.67 on this one so the difference is getting closer.

PCU--Have the Sep 20 puts and sold some Sep 22.5 calls on half the shares. Sold 100 shares at 23 and plan on selling at several other points on the way up like 24, 25, etc. That will lower the basis and might eventually lock in Sept profit. Basis is 21.39.

DRYS--Have Sept 5 puts and sold some Aug 6 calls last week. Still lots of shares free to participate in any rally should one materialize. I will sell calls on the way up and roll up, etc as opportunities present themselves. Got a lot of work on this one since the basis is 20.54. I have enough shares that I could break them up into 6 parts and sell some calls each week while I wait for a rally which is a likely strategy.

FAS--Reverse split occurred. I bought Aug 42 puts and my outstanding Jul calls became 50 strike so they expired worthless. I have a basis of 60.35 now. I will likely sell some calls on Monday if the futures are strong and try to collect $3 per share on the highest strike possible likely 52 or 53. That would give lots of room to rally over next month before I have to worry about any type of roll. It will take a few more months but I think I will likely end up with a small profit in the end.

I will keep you updated.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Noon quicky update (on my stocks)--
ONXX-good reports on Phase II study of Nexavar in breast cancer. Stock up about 25% to between 35 and 36. Will have to see what transpires over next few days. I have some Aug 30 calls, but several free shares have participated in this rally. May end up selling 35 or 40 calls in the next week or so depending on level of follow-thru. I will let you know what I end up doing and my thoughts. No changes today, however. I have decided not to trade on any big movement since that works better for me.
 

Don't like ads? Remove them while supporting the forum. Subscribe.

OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
It's been awhile since I updated this thread so I thought I should do that with the little bit of time I have.

GG--Enjoying the run in gold. I have been making adjustments. Sold some shares this week at $43.14. Selling calls and buying back as necessary. Bottom line is that I am holding Oct 30 puts on everything. I have outstanding Sep 40 calls and Oct 41 calls. The overall net basis for this stock is 28.96. I am willing to sell down 10% of my total position at various price points between now and the end of the year.

ONXX--Been making necessary adjustments. Today I bought back Sep 30 calls and sold Oct 35. Still have half the shares uncommitted. Sep 25 puts protect (yeah right). Will buy some new puts this next week. The basis is 37.35 so I am getting close to even on this one.

EMC--Been working with this one as it climbs. Have Oct 10 puts from earlier when the stock was much cheaper. Divided the shares into half and been stair stepping rolls so that now I have Sep 16 calls out. Will likely sell Oct 17s next week to buy back the Sep 16s and keep watching. Basis is 18.78. Getting there.

DRYS--Still needs lots of work. The profits from earlier puts were spent on PCU and FAS shares. I sold some Oct 6 calls this week. If it stays strong will sell Oct 7 calls, then 8s in a step wise fashion. I can even use the proceeds from PCU and FAS to add to my shares lowering the overall basis from the current 20.39. Lots of work.

PCU--Have Sep 20 puts and Sep 22.5 calls outstanding. Will let this one get called and will close the trade. I have 100 extra shares that I will sell outright. I have been selling on the way up. Last sale occurred at 29. Basis is 17.46 on this one. Initial shares purchased in February at 16.45 but watched it drop to 12.60 along the way.

FAS--May very well extricate myself from this one. Got 5 trading days left for Sep options. Have Sep 66 and 63 puts and sold Sep 76 calls earlier this week. Basis is now 72.25. I won't mind getting called out.

Taxable account:

DRYS--Have been doing much better here since I learned from many of the above trades. I would like to think I am developing a systematic approach.
Basis is 7.91 for DRYS. I have Sep 5 puts (will need new ones this week) and have sold some Oct 6 calls. Still have shares available to participate in any rally.

AUY--I have Jan 10 and Jan 9 puts. I have sold Sep 9 calls and Oct 11 calls. I will likely sell some more Oct 10 or 11 calls in order to buy back the Sep 9 calls. Basis on this one is 10.86 and I have Nov, Dec, and Jan to keep lowering the basis by selling calls.

CHK--I have several puts in various months (24, 22.5, 20 and 17.5) and have sold calls on half the shares at 27, 25 and 22.5. The basis is 23 even. Again I have some time to sell more calls along the way to lower the basis or even sell shares outright.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
I will post another update a little later since I am still working with and refining my collar strategy. In the meantime, I would like to answer and respond to a question that was posed to me. Here is the question:

Wouldn't it make more sense to buy a put that is months away from expiration rather than buying puts and selling calls each month. For example, i buy xyz at $10 in january, and buy a put at $9 that is in nov, however i will take out a covered call every month including november and that should not only cover the cost but give me some nice profit also. I realize the obligation is longer but it is also very safe. What do you think of this strategy?
First of all, let me say that this question is very insightful.

I have used this in my retirement account buying puts 3 or 4 months out for GG and EMC and then selling calls monthly. It has seemed to work pretty well, but my concerns relate mainly to managing the calls once sold.

What do you do when you buy the stock at $10, sell the call for $1 and the stock goes to $14 in that first month? Now you could let it get called out, but you haven't yet made back enough to pay for the put. You could roll up and out, but that costs more capital.

Conversely, if the stock gaps down from $10 to $5 on a bad earnings report before you have time to pay for the put, the calls are worth a lot less and you may not be able to collect enough call premium in time to offset the loss.

Now this could be a decent strategy, but it would require some diversification across several stocks since the most money would be made when the stock moves within a narrow trading range. Diversification across several stocks would help to make up for the losses associated with the above 2 scenarios. Of course, staying within a trading range means less volatility and less call premium as well.

Clearly, there might be theoretical promise but practical issues with which to deal. But if it were easy, everyone would be doing it.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Thanks, MJ.

Again, it has been quite some time since I updated the collar results. I am still trading them, rolling up calls, rolling down calls, buying new puts, etc. I thought I would provide a quick update while I am taking a break from some other things.

Retirement Accounts--

GG: Have done adjusting since last fall, buying low and selling higher. This is the only stock in this particular account and has been so for awhile. It also does not get any deposits so it is easy to follow returns on the strategy. Current basis is 29.10 which is not too different from last September. I have outstanding June 45 calls and a few May 43 calls that I will likely have to roll. I sold 100 shares today at 46.05 and will keep selling on the way up. I don't want to repeat mistakes of the past when it was in the 50's and I didn't sell or buy puts. Current puts are May 36. Will have to decide what to do with June puts in the next 2 weeks. This account is up 19% in 2008, 18% in 2009, and so far in 2010 about 5%. Looking to keep consistent at about 12% gains overall year to year using collars.

ONXX: Screwed this one up royally. It's my own fault, I know what I did and won't be making the same mistake. Basis is currently 34.23. Have some work to do to get this one back in shape.

EMC: Basis is now 18.56 so I have repaired this one with the current price at 18.79 above the basis. I will continue to chop away at the basis. Considering the first shares were purchased at 25.33, not too shabby with the market of 2008 thrown in.

DRYS: Still chipping away seeing what I can accomplish. Not the smartest plan, but I think the information will be helpful in the long run. Basis is 15.72. I plan on knocking this down another dollar or two by the end of the year. Will see what happens.

Got out of FAS with annualized profit of 8.1% and PCU with annualized 56%. Added SLW and AKAM.

SLW: Basis is 16.62 with calls at 17. Got whip-sawed a few months back and had to work. Will either let it get called for small profit or roll up into an ITM call since I am concerned that it will give up gains and can fall rather quickly.

AKAM: Basis is 33.3 with calls at 33 and 39 for May. Will likely roll and purchase puts such that I can lock in a profit since this one has been strong lately. The 39's should roll with a credit. I will have to ante up for the 33's and roll into an ITM call giving myself some cushion in case of a market retreat.

The bottom line for these retirement accounts is that I took profit in two positions since September, have a solid handle with GG, am profitable on EMC, AKAM, SLW, and have lots of work with ONXX and DRYS.

Despite the work to do and the mistakes I have made, I am pleased. These accounts only lost 18% during the market melt down. I was down a little last year also (mainly due to ONXX and DRYS) but am still ahead of the S&P 500 since January of 2007 when I started trading collars.

I suspect that the results will improve over time especially as I get more familiar with how they react under certain market conditions and as I focus more on extracting cash from the calls. I believe that extracting cash is an important component that I have given short shrift to over the past few years. I will start given that aspect more attention and tracking it on a monthly basis to see what the impact might be. I believe it will be positive.

That is all I have for now. Will continue to update periodically.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Well, it has again been awhile since I updated this thread. That doesn't mean, however, that I have given up on collars. It simply means that I have been pretty busy this summer. I think I might finally be getting the hang of investing with the collars and knowing what adjustments to make. I am encouraged going forward and am finally feeling as if I have a workable system. So, here goes:

GG--Seemed like a flat summer despite the gold price making great gains. The stock seemed to go almost nowhere. I did sell some in the past few weeks at 47 and 48.50. I also have Nov 44 calls and Nov 46 calls outstanding. I was a little nervous coming into earnings so purchased some Nov 44 puts. I am planning on letting these shares get called out and getting back in with a tighter collar. Current basis is 29.11 compared to 29.10 in May. While it seems as if little progress has been made, I have more cash in the account. Looks like I might gain around 7-8% for the year. I could have done a little better selling calls during the year and made more.

ONXX--The basis is 35.12 but I have Nov 28 calls outstanding. I plan to sell December 30 calls next week and buy back the Nov 28's. The basis will increase somewhat but the difference between the call strike and basis has been decreasing. I am pleased and feel that this will end up being repaired in the next 6 months.

EMC--Got called out of half in October at 21 while in Honduras. The other half will be called next Friday (theoretically) at 20. Basis on what is left is 15.78 so should make for a respectable profit considering I first bought at 25.33. Successful repair. Not the greatest return, but considering the market in 2008 I am cool with it. I have learned a lot and suspect my returns will be improving with time.

DRYS--Working on the repair. This is the other stock which is currently showing a paper loss. Basis is 15.62. It has spent quite some time in the 4's this year. I have Dec 5.5 calls outstanding and Nov 3 puts. Will plan on working with this quite a bit next year. Clearly inflation will help this out. I am waiting and being patient. Have plenty of shares uncommitted to participate in any rally.

SLW--Ended up sticking with this one and adding to position since May. Did a better job of locking in gains. Have Nov 35 puts on some of the shares. Will see some get called out as well. Overall will generate a decent profit regardless of what happens next week. Best case scenario is all called out (have a few Nov 36 calls) at avg price of 35.56 with basis of 28.86. If not, will have some shares going into December. Did sell some at 36.99 earlier this week.

AKAM--Closed out the position in October by buying the 50 puts and locking in gains. Closed at 46 and change so was nice to get out at 50 with a 40 basis. Bought back in and currently looking to sell some at 48 regardless. Have Nov 48 calls and 48 puts. Then will see what I need to do going into December with the shares that are left over. Basis is 47.94 so selling at 48 is no big deal. Have Nov 52.5 calls which will likely expire worthless so I can sell a December call in 10 days and buy a put establishing another collar and decreasing the basis.

That is the update for the retirement accounts. As mentioned, I have learned a lot and will be making a few adjustments to my technique going forward which I believe will be an improvement.
 
OP
OP
K

kidgas

Contributor
Jul 25, 2007
532
49
33
Indiana
Time for Another Update

This will probably be a brief update since it is getting late and I don't feel like writing a lot.

GG--Basis is now 27.58 with an outstanding call at 40. I have puts with a strike at 36. Clearly I have locked in my profits. I am simply trading up and down adding cash to the account. In fact, I have enough extra cash that I took a position in AKS in the same account.

AKS--Basis is 16.13 with March 14 and March 16 puts. I have Feb 16 and Feb 17 calls. Will watch til Feb expiration and then sell for more premium to lower basis. I feel like I am in a good place with this stock that I purchased on 12/16/2010.

ONXX--Working on the repair. Basis is 37.91 with a put at 31 and some calls at 35. Only a short while and this should be fixed with a profit.

SLW--Basis is 29.03 with puts at 30 and 32 and a set of calls at 30. I sold quite a bit in January when the 37 puts were exercised. This is the result of getting back in at a cheaper price. I am pleased with the way this is working out.

AKAM--Basis of 44.57 with puts at 47 and calls at 50. Guaranteed profit. This is my third go around with AKAM following gains of 25% over 10 months and 3.5% over 3 months.

DRYS--This will take forever to repair but I am appreciating the education. Basis is 15.84 with the stock trading just below 5. Maybe by the end of 2011, the gap will close somewhat.

I think I am almost to the point where I will never lose money in the market again. Other than ONXX and DRYS in which I know what mistakes I have made, I have gained on 20/21 collar trades. The other loss was VCLK and I could have made a profit on that but I was shifting gears slightly at the time and chose to sell for some cash.

With my current open positions, I am looking at a record of 24/27 or 89% success rate. The average percent gain for the 21 completed trades is 15.7%. I just wish I had more capital. Oh well, the knowledge is useful and someday the knowledge will be valuable as well.
 

gvv1965

PARKED
Read Millionaire Fastlane
Feb 1, 2011
8
0
11
54
Rome, Italy
Kidgas
thank you for these interesting posts.
I am new to the forum, however I have a more than decent experience with options and option strategies, including collars, wing spreads, etc.
If I correctly understood your decision process:
1) you buy a stock you like (say XYZ) after your analyses (Question: technical? fundamental?)
2) soon after the purchase, you protect it with puts (Questions: how do you determine the strike? 1OTM? on the basis of support levels?)
3) If the stock rallies up, you sell the calls, collarizing the bundle and actually morphing your position into a long spread
4) if the stock declines, you cash in your puts and buy additional stocks (averaging down) and the appropriate puts to protect your portfolio, while cashing also the dead short calls.

For the future, of course if feasible for you, I would appreciate if you could post more precise info about your trades, i.e. entry costs / revenues and dates for all the trades you put in place. This would facilitate, I think, the analysis from readers.

Additionally, have you ever tried, for non trending stocks, to target ranges instead of bullish position like the collars? Instead on betting on trends (up or down) I try sometime to target ranges at expiration, using therefore wingspreads like flies or broken wing butterflies.
If of interest for you and/or other readers, I can be more detailed on that on subsequent posts
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Sponsored Offers

  • Sticky
MARKETPLACE Fox's Web Design Guide: Earn $100K this year (Yes, 2020!) and Go Fastlane
I have zero coding skills whatsoever. Are coding skills needed? Will the be learned in the...
  • Sticky
MARKETPLACE How To Create A 100K-1M+ Sales Funnel
@LynX You know, this is a "Marketplace" Thread. Completely appropriate to offer goods and...
  • Sticky
MARKETPLACE You Are One Call Away From Living Your Dream Life - LightHouse’s Accountability Program ⚡
Dropping a quick note in here to say... if you are on TFL, you are part of an elite group of...
  • Sticky
MARKETPLACE KAK’s “Kill Bigger” Incubation Program- With DAILY personal attention.
I joined @Kak's business incubator in the first week of May. During our daily chats we uncovered...
  • Sticky
MARKETPLACE Lex DeVille's - Advanced Freelance Udemy Courses!
This is your May reminder that you can do this. I'll keep it short. These are the May promos...
  • Sticky
MARKETPLACE Grow Your Business With a Book (An Unorthodox Marketing Strategy That Built One of the Largest...
Thanks! This is a cool idea, actually. I would like to use your experience as I heard that these...
  • Sticky
FEATURED! Introducing... WEALTH EXPO$ED, A Short Story By MJ DeMarco
would this be available in paper version? I know it's short, but most of my family is...


Visit A Forum Sponsor
sponsor

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Monthly conference calls with doers
Ideas needing execution, more!

Join Fastlane Insiders.

Top Bottom
AdBlock Detected - Please Disable

Yes, ads can be annoying. But please...

...to support the Unscripted/Fastlane mission (and to respect the immense amount of time needed to manage this forum) please DISABLE your ad-block. Thank you.

I've Disabled AdBlock