Criteria for Rolling an Option

In the ledger for each security, I now have a section that looks like this:

RIU	Payback	Prem	Strike	Bid	Ask	Ticker
-2.4%	-11.6%	$0.02	$19.00	$7.10	$7.15	MBYDS.X
-2.2%	-13.3%	$0.07	$20.00	$6.15	$6.20	MBYDT.X
-2.0%	-16.0%	$0.12	$21.00	$5.20	$5.30	MBYDU.X
-1.6%	-19.0%	$0.22	$22.00	$4.30	$4.35	MBYDV.X
-1.0%	-23.0%	$0.37	$23.00	$3.45	$3.50	MBYDW.X
--	--	$0.56	$24.00	$2.64	$2.68	MBYDX.X
1.1%	26.0%	$0.86	$25.00	$1.94	$1.96	EEMDY.X
2.8%	33.0%	$1.26	$26.00	$1.34	$1.35	EEMDX.X
1.1%	9.0%	$0.87	$27.00	$0.87	$0.88	EEMDE.X
-0.4%	-2.5%	$0.50	$28.00	$0.50	$0.52	EEMDH.X

It gives me an overview of all of the near-term options and the potential reward for rolling the option. The gray-shaded cells indicate the current option I hold. The green-shaded cells tell me the rolling choice that would be the maximum RIU, maximum Payback, and maximum premium.

"RIU" is the Return I would get if I roll to that option price and the price remains unchanged through the option expiration date.

"Payback" is the amount I recover when I roll the option. That is, if I roll up the option by $2 in strike price for a net cost of $1, then my "Payback" would be $1. Again, this assumes the stock price will remain unchanged through the option expiration date. Also, if the strike price is higher than the current stock price, the "Payback" is to the current stock price, not the strike price of the option.

Currently, I am thinking my thresholds will be a minimum of 2% RIU and 40% Payback in order to roll an option. I may decide to adjust that for the number of days remaining, but I haven't decided just yet. It would make it easier to compare rolling with multiple-month options when an option month-end is approaching.
 

USO -- Roll Position Up

The USO position was rolled up:

Price	Date	Description	Total	aXIRR	aROI
$31.80	2009-03-24	Buyback 10 USO Apr 2009 $29 @ $3.60	-$3,619.95	62.9%	47.8%
$31.80	2009-03-24	Sell 10 USO Apr 2009 $32 @ $1.80	$1,780.05	79.5%	59.0%

 

Catchup Commentary

Now that all transactions have been updated, a few observations:

• Deciding to roll options based on ANNUAL XIRR and ROI numbers was a mistake. The biggest problem was that any change in price on the stock or any rolling of the option had a magnified effect because the holding was of such a short duration.
  
  Since I am always writing the near-term options, I now believe all decisions should be based on some monthly threshold. It will make everything more an apples vs apples comparison.
  
  
• Overall, the covered calls have done well in protecting capital. B&H of all positions thus far would have given me a loss of 13.2%. With the covered calls, that has been reduced to a loss of 2.9%. Remember, this is only over 3 months. A bad 3 months.
  
  
• Most of the losses could have been avoided through better equity selection. Both DIA and WFC losses add up to more than my overall losses. I had doubts about DIA before entering it, since I had seen articles about it being a "sick" index, but I ignored them. And I was foolish enough to believe WFC could avoid the panic going on in the banking industry.
  

 

USO -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$27.90	2008-12-26	Buy 1000 USO @ $27.90	-$27,900.00	--	--
$27.90	2008-12-26	Sell 10 USO Jan09 $28 Calls @ $2.40	$2,380.05	371.0%	148.3%
$32.90	2008-12-31	Buyback 10 USO Jan 2009 $28 @ $5.50	-$5,519.95	401.3%	154.5%
$32.90	2008-12-31	Sell 10 USO Feb 2009 $30 @ $5.70	$5,680.05	198.8%	108.4%
$34.06	2009-01-02	Buyback 10 USO Feb 2009 $30 @ $6.50	-$6,519.95	198.8%	108.4%
$34.06	2009-01-02	Sell 10 USO Feb 2009 $35 @ $4.53	$4,510.05	321.1%	156.3%
$31.62	2009-01-13	Buyback 10 USO Feb 2009 $35 @ $1.95	-$1,969.95	158.3%	99.3%
$31.62	2009-01-13	Sell 10 USO Feb 2009 $31 @ $3.00	$2,980.05	186.8%	108.4%
$28.30	2009-02-02	Buyback 10 USO Feb 2009 $31 @ $0.75	-$769.95	58.6%	45.3%
$28.30	2009-02-02	Sell 10 USO Feb 2009 $28 @ $2.00	$1,980.05	96.6%	66.6%
$25.74	2009-02-12	Buyback 10 USO Feb 2009 $28 @ $0.40	-$419.95	15.7%	13.8%
$25.74	2009-02-12	Sell 10 USO Feb 2009 $26 @ $1.00	$980.05	32.6%	26.9%
$23.87	2009-02-17	Buyback 10 USO Feb 2009 $26 @ $0.20	-$219.95	-21.3%	-22.0%
$23.98	2009-02-17	Sell 10 USO Mar 2009 $24 @ $2.00	$1,980.05	21.7%	17.9%
$27.46	2009-02-26	Buyback 10 USO Mar 2009 $24 @ $4.00	-$4,019.95	22.1%	18.2%
$27.46	2009-02-26	Sell 10 USO Mar 2009 $27 @ $1.90	$1,880.05	39.6%	31.6%
$28.84	2009-03-18	Buyback 10 USO Mar 2009 $27 @ $1.90	-$1,919.95	38.9%	31.1%
$28.84	2009-03-18	Sell 10 USO Apr 2009 $29 @ $2.00	$1,980.05	89.5%	62.7%
$29.00	2009-04-17	Sell at end of period	$29,000.00	62.9%	47.8%

 

SPY -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$86.81	2008-12-26	Buy 1000 SPY @ $86.81	-$86,810.00	--	--
$86.81	2008-12-26	Sell 10 SPY 12/31 $87 Call @ $1.62	$1,600.05	288.9%	134.6%
$89.97	2008-12-31	Buyback 10 12/31 $87 Call @ $3.10	-$3,119.95	356.2%	150.5%
$89.97	2008-12-31	Sell 10 SPY Jan 2009 $90 @ $2.70	$2,680.05	135.5%	86.5%
$87.67	2009-01-12	Buyback 10 SPY Jan 2009 $90 @ $0.79	-$809.95	50.0%	40.4%
$87.67	2009-01-12	Sell 10 SPY Jan 2009 $88 @ $1.56	$1,540.05	73.5%	55.1%
$84.10	2009-01-14	Buyback 10 SPY Jan 2009 $88 @ $0.40	-$419.95	-12.1%	-12.6%
$84.10	2009-01-14	Sell 10 SPY Feb 2009 $84 @ $5.11	$5,090.05	34.0%	28.3%
$80.58	2009-01-21	Buyback 10 SPY Feb 2009 $84 @ $2.87	-$2,889.95	2.7%	2.5%
$80.58	2009-01-21	Sell 10 SPY Feb 2009 $81 @ $4.45	$4,430.05	16.0%	14.0%
$86.45	2009-02-06	Buyback 10 SPY Feb 2009 $81 @ $6.69	-$6,709.95	19.9%	17.2%
$86.45	2009-02-06	Sell 10 SPY Feb 2009 $87 @ $2.49	$2,470.05	31.2%	26.3%
$82.66	2009-02-11	Buyback 10 SPY Feb 2009 $87 @ $0.60	-$619.95	-2.3%	-2.2%
$82.66	2009-02-11	Sell 10 SPY Feb 2009 $83 @ $2.05	$2,030.05	9.2%	8.4%
$79.41	2009-02-17	Buyback 10 SPY Feb 2009 $83 @ $0.45	-$469.95	-28.2%	-30.1%
$75.59	2009-02-24	Sell 10 SPY Mar 2009 $76 @ $3.10	$3,080.05	-16.7%	-16.7%
$69.38	2009-03-05	Buyback 10 SPY Mar 2009 $76 @ $0.50	-$519.95	-43.8%	-50.4%
$69.38	2009-03-05	Sell 10 SPY Mar 2009 $70 @ $2.25	$2,230.05	-35.8%	-39.2%
$76.05	2009-03-13	Buyback 10 SPY Mar 2009 $70 @ $6.25	-$6,269.95	-33.3%	-36.1%
$76.05	2009-03-13	Sell 10 SPY Apr 2009 $76 @ $3.36	$3,340.05	-15.8%	-15.6%
$76.00	2009-04-17	Sell at end of period	$76,000.00	-15.8%	-15.6%

 

MMM -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$70.69	2008-10-02	Transfer in	-$24,317.36	--	--
$0.50	2008-12-12	Dividend	$172.00	--	--
$55.76	2008-12-26	Buy 656 MMM @ $55.76	-$36,578.56	--	--
$55.76	2008-12-26	Sell 10 MMM Jan 2009 $55 @ $2.40	$2,380.05	-32.2%	-47.3%
$58.91	2009-01-06	Buyback 10 MMM Jan 2009 $55 @ $4.60	-$4,619.95	-32.2%	-47.3%
$58.91	2009-01-06	Sell 10 MMM Feb 2009 $60 @ $2.55	$2,530.05	-9.9%	-16.2%
$54.50	2009-01-20	Buyback 10 MMM Feb 2009 $60 @ $0.65	-$669.95	-34.6%	-63.2%
$54.50	2009-01-20	Sell 10 MMM Feb 2009 $55 @ $2.36	$2,340.05	-26.1%	-45.4%
$52.01	2009-02-02	Buyback 10 MMM Feb 2009 $55 @ $0.50	-$519.95	-39.0%	-71.9%
$52.01	2009-02-02	Sell 10 MMM Feb 2009 $50 @ $2.66	$2,640.05	-38.7%	-70.7%
$47.45	2009-02-17	Buyback 10 MMM Feb 2009 $50 @ $0.25	-$269.95	-51.3%	-100.7%
$47.59	2009-02-17	Sell 10 MMM Mar 2009 $45 @ $4.00	$3,980.05	-37.1%	-70.5%
$0.51	2009-02-18	Dividend	$510.00	--	--
$41.91	2009-03-06	Buyback 10 MMM Mar 2009 45.0 @ $0.50	-$519.95	-50.5%	-102.5%
$47.76	2009-03-19	Sell 10 MMM Apr 2009 50.0 @ $1.60	$1,580.05	-15.8%	-28.3%
$47.76	2009-04-17	Sell at end of period	$47,760.00	-15.3%	-27.5%

 

IWM -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$47.08	2008-12-26	Buy 2000 IWM @ $47.08	-$94,160.00	--	--
$47.08	2008-12-26	Sell 20 IWM Jan $47 Call @ $2.18	$4,330.05	120.0%	77.0%
$49.24	2009-01-02	Buyback 20 IWM Jan 2009 $47 @ $4.00	-$8,029.95	120.0%	77.0%
$49.24	2009-01-02	Sell 20 IWM Jan 2009 $50 @ $1.91	$3,790.05	124.4%	81.4%
$47.54	2009-01-12	Buyback 20 IWM Jan 2009 $50 @ $0.30	-$629.95	20.7%	18.6%
$47.54	2009-01-12	Sell 20 IWM Feb 2009 $48 @ $2.79	$5,550.05	51.5%	41.0%
$44.78	2009-01-20	Buyback 20 IWM Feb 2009 $48 @ $1.34	-$2,709.95	3.0%	2.8%
$44.78	2009-01-20	Sell 20 IWM Feb 2009 $45 @ $2.63	$5,230.05	23.6%	20.3%
$45.14	2009-02-12	Buyback 20 IWM Feb 2009 $45 @ $0.61	-$1,249.95	-6.7%	-6.5%
$45.56	2009-02-13	Sell 20 IWM Mar 2009 $46 @ $2.07	$4,110.05	42.3%	33.9%
$40.36	2009-02-20	Buyback 20 IWM Mar 2009 $46 @ $0.40	-$829.95	-18.0%	-17.9%
$39.93	2009-02-24	Sell 20 IWM Mar 2009 $40 @ $2.06	$4,090.05	-4.4%	-4.2%
$36.89	2009-03-04	Buyback 20 IWM Mar 2009 $40 @ $0.40	-$829.95	-38.6%	-43.1%
$38.86	2009-03-12	Sell 20 IWM Mar 2009 $39 @ $1.01	$1,990.05	-11.0%	-10.5%
$40.83	2009-03-18	Buyback 20 IWM Mar 2009 $39 @ $2.08	-$4,189.95	--	--
$40.83	2009-03-18	Sell 20 IWM Apr 2009 $41 @ $1.97	$3,910.05	8.1%	7.0%
$41.00	2009-04-17	Sell at end of period	$82,000.00	9.4%	8.2%

 

EEM -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$26.85	2009-01-06	Buy 2000 EEM @ $26.85	-$53,700.00	--	--
$26.85	2009-01-06	Sell 20 EEM Jan 2009 $27 @ $0.95	$1,870.05	264.6%	127.1%
$25.23	2009-01-08	Buyback 20 EEM Jan 2009 $27 @ $0.31	-$649.95	-62.5%	-93.4%
$25.23	2009-01-08	Sell 20 EEM Jan 2009 $25 @ $1.05	$2,070.05	3.4%	3.1%
$24.19	2009-01-13	Buyback 20 EEM Jan 2009 $25 @ $0.31	-$649.95	-77.5%	-138.0%
$24.19	2009-01-13	Sell 20 EEM Feb 2009 $24 @ $1.92	$3,810.05	13.5%	11.3%
$23.48	2009-02-12	Buyback 20 EEM Feb 2009 $24 @ $0.48	-$989.95	-19.7%	-19.3%
$23.48	2009-02-12	Sell 20 EEM Feb 2009 $23 @ $1.10	$2,170.05	-1.2%	-1.1%
$22.08	2009-02-18	Buyback 20 EEM Feb 2009 $23 @ $0.20	-$429.95	-28.3%	-28.8%
$22.08	2009-02-18	Sell 20 EEM Mar 2009 $22 @ $1.55	$3,070.05	6.4%	5.3%
$23.38	2009-03-16	Buyback 20 EEM Mar 2009 $22 @ $1.60	-$3,229.95	1.2%	1.0%
$23.89	2009-03-17	Sell 20 EEM Apr 2009 $24 @ $1.40	$2,770.05	34.6%	26.2%
$24.00	2009-04-17	Sell at end of period	$48,000.00	36.7%	27.7%

 

ED -- Catchup

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$38.30	2008-12-26	Buy 1000 ED @ $38.3	-$38,300.00	--	--
$38.30	2008-12-26	Sell 10 ED Feb 2009 $40 @ $0.80	$780.05	14.4%	13.3%
$39.79	2009-02-12	Buyback 10 ED Feb 2009 $40 @ $0.20	-$219.95	46.6%	38.6%
$39.85	2009-02-12	Sell 10 ED Mar 2009 $40 @ $0.85	$830.05	39.1%	33.4%
$0.59	2009-02-13	Dividend	$590.00	--	--
$37.36	2009-02-20	Buyback 10 ED Mar 2009 40.00 @ $0.20	-$219.95	2.7%	2.6%
$34.70	2009-03-12	Sell 10 ED Apr 2009 $35 @ $1.30	$1,280.05	-7.0%	-7.0%
$35.00	2009-04-17	Sell at end of period	$35,000.00	-2.3%	-2.2%

 

WFC -- Catchup -- Closed Position

This is a catchup post, since I haven't been diligently posting transactions.

I entered this position because I thought WFC was a solid purchase and I expected it to emerge as a leader in the banking industry. But its price movements were not exempt from the industry panics and was too volatile for my liking, so I exited.

Price	Date	Description	Total	aXIRR	aROI
$18.73	2009-01-16	Buy 2000 WFC @ $18.73	-$37,460.00	--	--
$18.73	2009-01-16	Sell 20 WFC Feb 2009 $20 @ $2.40	$4,770.05	313.9%	132.8%
$16.10	2009-01-20	Buyback 20 WFC Feb 2009 $20 @ $1.50	-$3,029.95	-14.6%	-13.6%
$16.10	2009-01-20	Sell 20 WFC Feb 2009 $15 @ $3.60	$7,170.05	66.2%	40.4%
$18.49	2009-02-06	Buyback 20 WFC Feb 2009 $15 @ $4.69	-$9,399.95	66.2%	40.4%
$18.49	2009-02-06	Sell 20 WFC Feb 2009 $17.50 @ $3.00	$5,970.05	168.7%	84.1%
$15.73	2009-02-12	Buyback 20 WFC Feb 2009 $17.50 @ $0.65	-$1,329.95	-16.5%	-14.5%
$15.73	2009-02-12	Sell 20 WFC Mar 2009 $16 @ $2.50	$4,975.05	80.8%	48.3%
$10.82	2009-02-20	Buyback 20 WFC Mar 2009 $16 @ $0.40	-$829.95	-95.3%	-206.1%
$11.49	2009-02-24	Sell 20 WFC Mar 2009 $12 @ $1.65	$3,270.05	-47.0%	-45.1%
$14.81	2009-02-26	Buyback 20 WFC Mar 2009 $12 @ $3.70	-$7,429.95	-70.0%	-88.0%
$14.81	2009-02-26	Sell 20 WFC Mar 2009 $15 @ $1.79	$3,550.05	-3.0%	-2.4%
$10.74	2009-03-03	Buyback 20 WFC Mar 2009 $15 @ $0.30	-$629.95	-87.4%	-138.0%
$10.74	2009-03-03	Sell at end of period	$21,482.00	-94.4%	-189.0%

 

SDS -- Catchup -- Position Closed

This is a catchup post, since I haven't been diligently posting transactions.

This was a speculative position I entered. It was intended as a very short-term trade and I entered it expecting to have the position exercised. I was using data from my P&F experiment which indicated a downturn in the market.

Price	Date	Description	Total	aXIRR	aROI
$86.46	2009-02-18	Buy 1000 SDS @ $86.46	-$86,462.64	--	--
$86.46	2009-02-18	Sell 10 SDS Feb 2009 $84 @ $4.20	$4,180.05	--	--
$91.01	2009-02-20	Sell at end of period	$83,975.00	4008.4%	357.2%

 

PFE -- Catchup -- Closed Position

This is a catchup post, since I haven't been diligently posting transactions.

I closed this position because PFE reduced their dividend amount and announce an acquisition that I wasn't fond of.

Price	Date	Description	Total	aXIRR	aROI
$17.31	2008-12-22	Buy 2000 PFE @ $17.31	-$34,620.00	--	--
$17.03	2008-12-26	Sell 20 PFE Jan09 $17.50 Calls @ $0.38	$730.05	7.6%	7.2%
$17.29	2009-01-14	Buyback 20 PFE Jan 2009 $17.50 @ $0.13	-$289.95	34.1%	29.1%
$17.29	2009-01-14	Sell 20 PFE Feb 2009 $17 @ $0.86	$1,690.05	32.6%	27.6%
$16.32	2009-01-26	Buyback 20 PFE Feb 2009 $17 @ $0.20	-$429.95	-27.8%	-31.0%
$15.93	2009-01-27	Sell at end of period	$31,860.00	-27.8%	-31.0%

 

EFA -- Catchup -- Closed Position

This is a catchup post, since I haven't been diligently posting transactions.

Price	Date	Description	Total	aXIRR	aROI
$43.01	2008-12-22	Buy 700 EFA @ $43.01	-$30,107.00	--	--
$43.01	2008-12-22	Sell 7 EFA Jan09 $43 Calls @ $1.55	$1,068.05	69.4%	51.8%
$0.54	2008-12-31	Dividend	$378.70	--	--
$36.58	2009-01-13	Buyback 7 EFA Jan 2009 $43 @ $0.35	-$261.95	44.8%	35.9%
$41.99	2009-01-13	Sell 7 EFA Feb 2009 $42 @ $2.25	$1,558.05	53.3%	41.0%
$38.49	2009-01-20	Buyback 7 EFA Feb 2009 $42 @ $1.55	-$1,101.95	-8.8%	-8.5%
$38.49	2009-01-20	Sell 7 EFA Feb 2009 $38 @ $2.45	$1,698.05	-3.6%	-3.4%
$36.63	2009-02-17	Buyback 7 EFA Feb 2009 $38 @ $0.25	-$191.95	-25.8%	-26.7%
$36.50	2009-02-17	Sell at end of period	$25,550.00	-28.5%	-30.0%

 

DIA -- Catchup -- Position Closed

This is a catchup post, since I haven't been diligently posting transactions.

I closed the DIA position because I had been reading a lot about how the Dow Jones Industrial Average is a "sick" index. And my experience with it had not been good either. My overall history:

Price	Date	Description	Total	aXIRR	aROI
$89.91	2009-01-06	Buy 1000 DIA @ $89.91	-$89,905.60	--	--
$89.91	2009-01-06	Sell 10 DIA Jan 2009 $90 @ $1.96	$1,940.05	121.7%	78.8%
$86.74	2009-01-08	Buyback 10 DIA Jan 2009 $90 @ $0.69	-$709.95	-40.1%	-49.8%
$86.74	2009-01-08	Sell 10 DIA Jan 2009 $86 @ $2.41	$2,390.05	-11.4%	-11.6%
$85.14	2009-01-12	Buyback 10 DIA Jan 2009 $86 @ $1.14	-$1,159.95	-38.5%	-46.5%
$85.14	2009-01-12	Sell 10 DIA Feb 2009 $85 @ $4.05	$4,030.05	16.4%	14.3%
$80.40	2009-01-20	Buyback 10 DIA Feb 2009 $85 @ $1.84	-$1,859.95	-25.7%	-27.2%
$80.40	2009-01-20	Sell 10 DIA Feb 2009 $80 @ $4.10	$4,080.05	-11.2%	-10.8%
$78.00	2009-02-12	Buyback 10 DIA Feb 2009 $80 @ $1.01	-$1,029.95	-34.7%	-38.1%
$78.00	2009-02-12	Sell 10 DIA Feb 2009 $77 @ $2.52	$2,500.05	-15.8%	-15.6%
$75.76	2009-02-18	Buyback 10 DIA Feb 2009 $77 @ $0.40	-$419.95	-35.9%	-39.6%
$71.82	2009-02-24	Sell 10 DIA Mar 2009 $72 @ $2.95	$2,930.05	-29.4%	-30.0%
$66.85	2009-03-05	Buyback 10 DIA Mar 2009 $72 @ $0.50	-$519.95	-51.7%	-60.5%
$66.50	2009-03-05	Sell at end of period	$66,500.00	-60.9%	-78.6%