September 2008 Expiry Update

Here’s an update on my current positions.

Arbitrage Account:

  • Own 800 400 XHB @ cost of $22.72 (400 @ $22.72, 400 @ $19.80) : XHB closed at $22.33 (position at -$156.00) : Cash Flow $2,058 Note: 400 shares of XHB have been assigned at $20.00 so profit of $80 comes in as 400 were purchased at $19.80 and assigned at $20. I still own 400 shares of XHB with 4 contracts for Dec $23 strike option sold.
  • Own 400 DDM at cost of $74.30 : DDM closed at $60.08 (position at -$5,688) : Options Cash Flow $685.00
  • Own 500 DUG at cost of $43.50 : DUG closed at $35.19 (position at -$4,155) : Options Cash flow $2,141.00

Mini Account:

  • Own 200 DDM at $77.80 : DDM closed at $60.08 (position at -$3,544) : Options Cash Flow $2,502.00

Power Account:

  • Own 500 DDM at $71.95 : DDM closed at $60.08 (position at -$4,105) : Options Cash Flow $1,100.00
  • Own 200 QID at $46.75 : QID closed at $47.78 : Options Cash Flow $926.00
  • Own 400 SSO at $65.65 : SSO closed at $57.29 (position at -$3,344) : Options Cash Flow $1,335.00
  • Own 500 SDS at $64.00 : SDS closed at $66.60 : Options Cash Flow $1,947.00

QID sold at $45.00 (options assigned) originally bought at $46.74 (-$348 loss + $926.00 options profit = $578), SDS sold at $64 (options assigned). Approx. 50k cash.

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4 Responses to September 2008 Expiry Update

  1. Eric says:

    Slick, I’ve been following your covered call strategies for a while and really appreciate your openness in sharing your portfolios. But it looks like your portfolios lost a bit more in value than you gained in premiums. How do you plan to deal with that? On those positions, do you become buy-and-hold? Or keep writing calls on them (and risk getting called for well below what you bought at?)
    I’m just interested in how to deal with or plan for the inevitability that some trades just won’t work out.

  2. anonymous says:

    My XHB got called as well. I’m a little bummed, because it’s done pretty well for me over the last 9 months or so, but oh well. It does feel nice to have some free cash in the account again.

    My history with this cash cow looks something like:

    2/26/08: buy 300 XHB @ 22.69
    2/26/08: sell 3 Mar $23 call, net $255
    3/24/08: sell 3 Apr $23 call, net $405
    4/16/08: sell 3 May $23 call, net $315
    5/14/08: sell 3 Jun $23 call, net $105
    5/21/08: buy 200 HXB @ 20.01
    5/21/08: sell 5 Jun $20 call, net $300
    6/10/08: sell 5 Jul $20 call, net $150
    8/08/08: sell 5 Sep $20 call, net $385

    Total cost to acquire: (300 * 22.69) + (200 + 20) = $10807
    Total sale: 500 * 20 = $10000

    Total premiums along the way: $1915

    So overall I made about $1100 off XHB. Not great, but not horrible either.
    Sale price

  3. RichSlick says:

    Eric,

    The goal of ETF CC is to mitigate losses, earn premium/income/cash flow (even in a down market) and profit from the upsides when markets excel.

    I had people ridicule me repeatedly on XHB (as an example) because it went from $23 to $17 and people thought the world was coming to and end. XHB has been the most profitable ETF CC I’ve had this year.

    As for the other positions, that’s the point. As an example, I bought DUG at $43.50 and immediately made $2100. If I were to sell DUG tomorrow at $35 then I’d have a huge loss but that’s not my plan. I’m holding on to DUG for the next 30 days until the options plays out. DUG may be at $15 in 30 days or $100 in 30 days but either way, I’ve generated income from the trade.

    I will hold DUG until it either returns to where I bought it or up to a point where I’ve broken even if I don’t feel it’s a long term viable play.

    Unfortunately, the government meddling is going to cause everyone to lose lots of money. The market has artificially rallied because of the ban on short selling. After the ban ends, the market is going to come crashing down.

    I may sit in cash for a while because of all this nonsense but I’m “stuck” with some trades for now that I’m comfortable holding over the next decade or so if I have to.

  4. RichSlick says:

    Anonymous,

    That looks like a 10% return from February through September. That beats the S&P, Dow and Russell for the year hands down (unless the government forces the Dow to 15,000) on Monday ;)

    Annualized it’s probably more like 15% but you’d need to keep selling calls at the same rate.

    I think it is great and much better than any other investment you’d be in.

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