IE/IWM -- Income for Week 9

In addition to doing a buy/write to generate week 9 income, there was also a $0.02 limit order triggered:

Date	Group	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-30	F	STO 4 IWM 5/9 2014 $110 Call	Open	$668.89	4	$1.71	$14.95	$0.16	9	$668.89	--
2014-04-30	F	Buy 400 Shares IWM	Open	-$44,060.95	400	$110.13	$8.95	$0.00	7	--	8
2014-04-28	A	BTC 8 IWM 5/9 2014 $119 Call	--	-$21.23	8	$0.02	$4.95	$0.28	2	-$21.23	--
2014-03-18	A	Buy 800 Shares IWM	Open	-$95,520.95	800	$119.39	$8.95	$0.00	1	--	8

So now I have 800 shares, cost basis $119, that I need to sell calls on. Currently, that would mean going out to the 2014-07-09 expiration date. Since the calls on another 1000 shares are near the $0.02 limit order, I'm going to wait a bit before selling new calls.

I should note that I tried something different for today's orders. I've toyed with a 2-day RSI in the past. I used them to place contingent orders for today. The above buy/write was one of those contingent orders. That order was written as:

-- If the price of IWM drops below $110.17,
-- Then do a buy/write of 400 shares of IWM and four 5/9 2014 $110 calls for a net of $108.60.

I ended up with a net of $108.42 (before transaction costs), so that worked out. I used the 2-day RSI value of 10 to find the trigger price. This is what my workbook had:

Next Intraday Price	Next 2-Day RSI	Description
$110.18	10.0000	<=== Buy Target Price
$115.17	90.0000	<=== Sell Target Price

I also have a contingent order for selling the calls for the 800 share of IWM that were bought at $119. It says:

-- If the price of IWM rises above $115,
-- Then sell eight 5/17 2014 $119 calls with a limit price of $0.85

My limit prices were set based on how the data looked at yesterday's closing prices.

IE/IWM -- Income for Week 8

I did the buy/write for week 8:
 

Total Income and ROI ==>				$5,013.47		6.5%
Current Price and Gain/Loss on shares ==>				-$6,496.80		$113.93
Cost basis of currently held shares ==>				-$257,142.80	2200	-$116.88
Date	Group	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-23	E	STO 4 IWM 5/2 2014 $114 Call	Open	$500.89	4	$1.29	$14.95	$0.16	8	$500.89	--
2014-04-23	E	Buy 400 Shares IWM	Open	-$45,568.95	400	$113.90	$8.95	$0.00	6	--	7

IE/IWM -- Calls exercised

The buy/write order from last week for week 7 income was assigned this week. Since I'm ahead on the week's income coverage, there was no need to take any action this week.

Date	Group	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-18	D	Assigned 400 Shares IWM	Closed	$44,385.05	400	$111.00	$14.95	$0.00	--	--	--
2014-04-11	D	STO 4 IWM 4/19 2014 $111 Call	Called	$484.89	4	$1.25	$14.95	$0.16	7	$484.89	--
2014-04-11	D	Buy 400 Shares IWM	Closed	-$44,292.95	400	$110.71	$8.95	$0.00	4	--	5

IE/IWM -- A few thoughts...

It's still early, but the three things I've learned so far in this experiment:

1. Starting out mid-week was a mistake. It meant the starting position needed to be larger than normal to meet the profit goal. This required a larger stake of the starting cash balance.
   
   
2. The $0.02 limit orders are valuable. First, they provide a cheap way out of a position (with low commissions from O/X). Second, they allow the next position to be written early, earning more extrinsic value. Easily worth the cost of not letting them expire. Third, it can allow an early exit because of an intra-day fluctuation in price.
   
   $0.03 or $0.04 might be better exit points. But I'll stick with $0.02 for now.
   
   
3. As the price of the underlying drops, option premiums go up. So a follow-up position may earn $500 on a smaller position -- both in smaller number of shares AND in the price of the underlying.
   
   Since calls are supposed to be written OTM, if the underlying price ever does go back up, there would also be additional profits not included in the weekly income.

IE/IWM -- Income for Week 7

I went ahead with a buy/write to generate income for week 7. This puts me about 50% into the starting cash portfolio. However, I am also 3 weeks ahead in income generation.

In hindsight, being anxious to start, starting mid-week on the first position was probably a mistake. I had to do the buy/write on 800 shares to generate the weekly income when there was only half a week left. If I had done it with an expiration of the following week, it probably would have been half that (or less).

But, that's what this experiment is about. Finding the issues that might arise.

Date/Time	Group	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-11 15:43	D	STO 4 IWM 4/19 2014 $111 Call	Open	$484.89	4	$1.25	$14.95	$0.16	7	$484.89	--
2014-04-11 15:43	D	Buy 400 Shares IWM	Open	-$44,292.95	400	$110.71	$8.95	$0.00	4	--	5

IE/IWM -- Income for Week 6

I added a "Group" column to indicate which purchase group transactions are related to. Transactions related to week 6 income generation are shaded yellow. The $0.02 limit orders closed out the outstanding calls for groups "B" and "C", so I had 1000 shares to use to generate income for week 6. I went with the 5/9 $116 Call so that they had the same expiration date as the outstanding call on group "A", which gave a bit more than the $500 goal for the week.

				$4,027.69			<== Total Income
				-$10,765.85		$111.56	<== Current Price and Gain/Loss on shares
				-$211,573.85	1800	-$117.54	<== Cost basis of currently held shares
Date/Time	Group	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-11 10:54	BC	STO 10 IWM 5/9 2014 $116 Call	Open	$804.62	10	$0.82	$15.00	$0.38	6	$804.62	--
2014-04-11 09:30	C	BTC 5 IWM 4/11 2014 $115 Call	--	-$15.13	5	$0.02	$4.95	$0.18	5	-$15.13	--
2014-04-10 11:00	B	BTC 5 IWM 4/11 2014 $117 Call	--	-$15.13	5	$0.02	$4.95	$0.18	4	-$15.13	--
2014-04-04 12:34	C	STO 5 IWM 4/11 2014 $115 Call	Rolled	$624.85	5	$1.28	$14.95	$0.20	5	$624.85	--
2014-04-04 12:34	C	Buy 500 Shares IWM	Open	-$57,513.95	500	$115.01	$8.95	$0.00	4	--	8
2014-04-03 15:00	B	STO 5 IWM 4/11 2014 $117 Call	Rolled	$629.85	5	$1.29	$14.95	$0.20	4	$629.85	--
2014-04-03 15:00	B	Buy 500 Shares IWM	Open	-$58,538.95	500	$117.06	$8.95	$0.00	4	--	8
2014-03-27 14:30	A	STO 8 IWM 5/9 2014 $119 Call	Open	$776.75	8	$0.99	$14.95	$0.30	3	$776.75	--
2014-03-27 13:52	A	BTC 8 IWM 3/28 2014 $116 Call	--	-$21.23	8	$0.02	$4.95	$0.28	2	-$21.23	--
2014-03-25 00:00	A	Dividend of $0.302 per share	--	$241.60	800	$0.30	$0.00	$0.00	2	$241.60	--
2014-03-24 12:04	A	STO 8 IWM 3/28 2014 $116 Call	Rolled	$584.75	8	$0.75	$14.95	$0.30	2	$584.75	--
2014-03-18 12:34	A	STO 8 IWM 3/22 2014 $120 Call	Expired	$416.76	8	$0.54	$14.95	$0.29	1	$416.76	--
2014-03-18 12:34	A	Buy 800 Shares IWM	Open	-$95,520.95	800	$119.39	$8.95	$0.00	1	--	8
Week Ending:				Cost basis	Shares	Price			Week	Income	aROI
2014-03-21				-$95,520.95	800	-$119.40			1	$416.76	22.69%
2014-03-28				-$95,520.95	800	-$119.40			2	$805.12	33.26%
2014-04-04				-$95,520.95	800	-$119.40			3	$776.75	36.27%
2014-04-11				-$211,573.85	1800	-$117.54			4	$614.72	16.06%
2014-04-18				-$211,573.85	1800	-$117.54			5	$609.72	15.84%
2014-04-25				-$211,573.85	1800	-$117.54			6	$804.62	16.50%
2014-05-02				-$211,573.85	1800	-$117.54			7	$0.00	14.14%
2014-05-09				-$211,573.85	1800	-$117.54			8	$0.00	12.37%
Rules:
1. Sell enough shares and calls to earn at least $500 income per week (0.1% of cash portfolio value)
2. Never sell calls below cost basis (roll out as needed)
3. Set a limit order of $0.02 per share on each new call position

IE/IWM -- Initial posting

Covered Call "Income Experiment"

I've decided to try a little "Income Experiment" on OptionXPress's Virtual Trader, using IWM. This is based on the concept of only worrying about income generation and not caring about the market value of the holdings.
 
Three trading rules:

1. Sell enough shares and calls to earn at least $500 income per week (0.1% of cash portfolio value)
2. Never sell calls below cost basis (roll out in time as needed)
3. Set a limit order of $0.02 per share on each new call position

Transactions so far (related transactions are color coded):

Date/Time	Description	Result	Total	Shares	Price	Comm	Fees	Week	Income	Week2
2014-04-10 11:00	BTC 5 IWM 4/11 2014 $117 Call	--	-$15.13	5	$0.02	$4.95	$0.18	4	-$15.13	--
2014-04-04 12:34	STO 5 IWM 4/11 2014 $115 Call	Open	$624.85	5	$1.28	$14.95	$0.20	5	$624.85	--
2014-04-04 12:34	Buy 500 Shares IWM	Open	-$57,513.95	500	$115.01	$8.95	$0.00	4	--	5
2014-04-03 15:00	STO 5 IWM 4/11 2014 $117 Call	Rolled	$629.85	5	$1.29	$14.95	$0.20	4	$629.85	--
2014-04-03 15:00	Buy 500 Shares IWM	Open	-$58,538.95	500	$117.06	$8.95	$0.00	4	--	5
2014-03-27 14:30	STO 8 IWM 5/9 2014 $119 Call	Open	$776.75	8	$0.99	$14.95	$0.30	3	$776.75	--
2014-03-27 13:52	BTC 8 IWM 3/28 2014 $116 Call	--	-$21.23	8	$0.02	$4.95	$0.28	2	-$21.23	--
2014-03-25 00:00	Dividend of $0.302 per share	--	$241.60	800	$0.30	$0.00	$0.00	2	$241.60	--
2014-03-24 12:04	STO 8 IWM 3/28 2014 $116 Call	Rolled	$584.75	8	$0.75	$14.95	$0.30	2	$584.75	--
2014-03-18 12:34	STO 8 IWM 3/22 2014 $120 Call	Expired	$416.76	8	$0.54	$14.95	$0.29	1	$416.76	--
2014-03-18 12:34	Buy 800 Shares IWM	Open	-$95,520.95	800	$119.39	$8.95	$0.00	1	--	8

The "Week" and "Week2" columns are just so I can do the weekly income summary table.

Summary of weekly income generation:

Week Ending	Cost basis	Shares	Price	Week	Income	aROI
2014-03-21	-$95,520.95	800	-$119.40	1	$416.76	22.69%
2014-03-28	-$95,520.95	800	-$119.40	2	$805.12	33.26%
2014-04-04	-$95,520.95	800	-$119.40	3	$776.75	36.27%
2014-04-11	-$211,573.85	1800	-$117.54	4	$614.72	16.06%
2014-04-18	-$211,573.85	1800	-$117.54	5	$624.85	15.92%
2014-04-25	-$95,520.95	800	-$119.40	6	$0.00	29.38%
2014-05-02	-$95,520.95	800	-$119.40	7	$0.00	25.18%
2014-05-09	-$95,520.95	800	-$119.40	8	$0.00	22.04%

Note that the "aROI" column is based on income generate for actual funds invested in IWM, and not the assumed $500,000 cash that I decided was avaialable for the strategy. Part of this experiment is to test the 0.1% weekly assumption.

Weekly explanations:

Week Ending	Description
2014-03-21	Initiated a covered call by buying 800 shares of IWM @ $119.39 and selling eight 3/22 $120 calls @ $0.54. A little less than the $500 goal, but it's really only for a half-week.
2014-03-28	The eight 3/22 $120 call expired worthless. I sold eight 3/28 $116 calls @ $0.75 for this week's income. Note that I shouldn't have done that, because $116 is below the cost basis of the 800 shares I had bought. In any case, the $0.02 limit order on those calls triggered, to finish out the week. I also managed to pick up $0.302 per share of dividend for the 800 shares of stock.
2014-04-04	To generate the income for this week, I sold eight 5/9 $119 calls on the 800 shares of stock I held.
2014-04-11	Since the currently held 800 shares of stock are obligated through 5/9, I had to initiate a new position for this week's income -- I bought 500 share of IWM @ $117.06 and sold five 4/11 $117 calls @ $1.29. I did this early, because of the drop in price of IWM. I figured I'd be better off buying them early, at a lower price, then after a recovery. Because I have faith in the recovery. :) Note that I have since bought back the five 4/11 $117 calls, because the $0.02 per share limit order was triggered.
2014-04-18	Because the price of IWM dropped another $2, I again got a head start on this week's income by buying 500 more shares of IWM @ $115.01 and selling the 4/11 $115 calls @ $1.28.
2014-04-25	Since it looks like I will have 1000 shares of IWM available at the end of this week, I will use them to generate income for this week. I expect the $0.02 limit order to trigger on the five 4/11 $115 calls sometime on 4/11. At which time, I will sell calls on 1000 shares of IWM at a cost basis of about $116. The prices will determine which expiration date I use.