| Date | Description | Total | aXIRR | aROI |
| 2009-01-06 | Buy 1000 DIA @ $89.91 | -$89,905.60 | | |
| 2009-01-06 | Sell 10 DIA Jan 2009 $90 @ $1.96 | $1,940.05 | | |
| 2009-01-08 | Buyback 10 DIA Jan 2009 90.0 @ $0.69 | -$709.95 | | |
| 2009-01-08 | Sell 10 DIA Jan 2009 86.0 @ $2.41 | $2,390.05 | | |
| 2009-01-16 | Sell at end of period | $86,000.00 | -11.4% | -11.6% |
| | Before Rolling | | -40.1% | -49.8% |
Posts
Wow!! You are rolling very quickly. What is your criteria when deciding when to roll? -- That would be a good topic for a post. I'm concerned that commissions and bid/ask spreads are hurtful to your return with such a tight rolling window that you apparently use.
ReplyDeleteJeff
P.S. It seems obvious you don't like my suggestion of waiting until the stock is >10% from the strike price before rolling.
Right now, the main criteria I use for rolling is whether it would improve the aXIRR and aROI, which would include the cost of the bid/ask spreads and commissions.
ReplyDeleteMy summary worksheet has a combined rank that I compute based on the StockRV (stock price relative to latest strike price) and the OptionRV (buyback price versus sell price). I use those three items (Rank, StockRV, and OptionRV) to determine if I even look at the equity.
In the case of both DIA and EEM roll-downs, the OptionRV had reached -65%, which seemed to be a good time to consider buying them back. Especially since the ATM options would now pay more premium than the OTM ones I currently had.
Randy,
ReplyDeleteQuestion: Is the 'summary worksheet' the same thing as what you posted as your 'ledger'? If not, could you send me an email with a sample of what the 'summary worksheet' looks like?
Comment: when you say 'whether it would improve the aXIRR and the aROI', I have a challenge for you to think about. Using my 'sunk cost' argument that you might have read about on my blog, shouldn't you really be comparing what your existing cc position will yield from today until expiration (rather than from the date you originally purchased it) vs. the possible roll-out alternative returns?
Jeff
Jeff,
ReplyDeleteThe "Summary Worksheet" is the one I posted here:
http://wrongwaycoveredcalls.blogspot.com/2009/01/summary-workbook-and-terminology.html
...although I have added the "Rank" column now, so I can sort the list and know to look at the top items first (highest change in stock price and/or option price). I'm still refining that column.
I've also added a weighted average of the aXIRR and aROI, so I can get an overview of all results.
If the aXIRR and aROI include the buyback of the current call and the sale of the new one, wouldn't it automatically include change in yield? That is, my original aXIRR and aROI tell me the result if I do nothing (and the price remains unchanged to expiration). The new aXIRR and aROI tell me the result if I roll-down and price remains unchanged to expiration.
BTW, in one of the two roll-downs I did today, the net daily time decay actually did go up.
Randy
Jeff,
ReplyDeleteOn a related note -- I'm even considering putting in limit orders on any call I sell, to buy it back on a 60% or more drop in price.
For example, my last sale on DIA was the Jan86 call @ $2.41. Would there be any reason NOT to put in a limit order to buy it back at $0.60 or so?
Randy