That represents $0.17 x 5265 to close out the position. As these are covered calls I own 5625 BHP against which I write these calls. Since doing this BHP has gone from $9.95 to close today at $8.93 so it’s fallen $1.02 (my average buy price was below $9.95).
In the same time I’ve earned net premiums of 0.24, 0.185 and 0.17, or 0.495 all up (less commissions). So I’m facing a net loss. I don’t feel bad about this as I think BHP should bounce back nicely. There is a risk of overtrading here.
OK, it appears that I have wondered from my trading strategy and am trading on emotion. Yes it is good to take insurance — in my case I did that by buying BHPEL back at 0.105 yesterday to close out my position.
I didn’t expect BHP to hit $9.49. For the record I don’t think it will hit it before 27 Feb 03 when the calls expire. But what if it did? So I closed out.
I need to document my trading strategy and follow it for a few trades.
I bought them back at 0.105 (0.005 profit) to close out the position. That makes it my worst option trade to date. I’m out $230 in commissions. Something is going on with BHP and I have no idea. Neither does my broker. I could hold on, if BHP hits $9.49 I get exercised and pay selling commission, or the option expires worthless. Either way I have too much to do to hover over the markets hoping.
After calling the order, I changed my mind. I’ll tough it out and see what happens. I have the ALL trade’s profits as a buffer. Luckily (?) it was too late, the trade went through and my position is closed out.
If BHP continues to rally I’ll write a 9.97 call next and should get good premium.
Hey a fast profit is a good profit. I’m out with a 11.60% gain (before commissions) in six days. I wish all my trades were like that.
OK after some needling I’ll blog when I do an option trade as well. Basically all I’ve done since November 2002 is write covered calls on my BHP holding. The deals were
5 December 10.21 BHP Call options
Each contract is 1053 shares so 5 = 5265 shares
Premium received $0.30 x 5265
bought them back to close out the position at $0.06
Income on deal is $0.24 x 5265 = $1,263.60 less commissions (~$240.00)
5 January 9.97 BHP Call option
Premium received $0.20 x 5265
bought them back to close out the position at $0.015
Income on deal is $0.185 x 5265 = $974.03 less commissions
Today wrote 5 February 9.49 BHP Call options
Premium received $0.11 x 5265
Income on deal so far is $0.11 x 5265 = $579.15
I don’t expect to buy them back to close out the position because
1) the options expire 27/2/02 – only 15 days away;
2) they are worthless unless BHP breaks $9.49 in that time;
3) I’ve become more bearish on BHP so I don’t mind being exercised.
NCP opened at 10.90 (up 0.32) and slid down to 10.79 at midday. The entire portfolio is in profit. But I don’t think things have bottomed yet.
So I decided to sell half the NCP holding at a close to high price of 10.85 at 3:00pm.
I am overweight NCP and that exceeds the 3% target gain. So if NCP heads down I’m still in profit. If it keeps climbing I’ve taken some profit and it is cheap insurance.
ALZ is Australand. They are property developers.
An annualised 8.57% yield before franking credits.
My overall portfolio is underweight Sydney real estate (I’m bearish on it but I’ve been wrong before). So stock market exposure to the property market.
At a Freestyler Network meeting in late July, I was told ALZ paid a 3c fully franked quarterly dividend (ex-div 9-Aug) and the stock was around $1.40.
Downside analysis should it become a long term hold:
Ouch another fall. Maybe I’m trying to learn Dollar Cost Averaging? I think it is not a good strategy for a trader.
The case for is at Motley Fool.
The case against is at Investopedia University.
Time for another foray. I think NCP has fallen enough to jump back in.
Nice profit for two weeks holding. For those who don’t want to work it out it is 6.48% before commissions.