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.
I was reviewing my watchlist and realised CSR has been trading 6.40-6.60 recently. I sold out in November at 5.56.
Trading doesn’t always win.
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.
I need the cash for another investment and the sell price represents a 10% gain on entry price of $9.85 so I’m taking profits. I have a sell in for CSR @ 5.63 but I don’t think it will hit this 3% price target today. Don’t you hate it when plans change? CSR was a hold but now I need the money elsewhere.
I did have a sell order in for my remaining NCP @ 10.46 but I cancelled it. If I’m betting the market will consolidate over the next few days, then NCP should follow.
I could sell as insurance but given how long I’ve gone on BHP it doesn’t really make sense.
NCP spent most of the day above 10.46 with a high of 10.59 before falling off in the last half hour to close at 10.46. So the call looks ok. We’ll see what happens over the weekend.
There, that’s out for all to see.
This is not strictly a trading position. But If it jumps I’ll take it.
Given the perilous state of the stock market I’ve been keeping an eye out for value stocks that pay consistent dividends, represent a discount to NTA and have good businesses. CSR was one of the ones on the list and is due to pay a dividend in November.
It’s languished recently so I thought I’d buy some for a longer term. If it jumps a decent percentage over a little while I’ll sell it. But this is the closest I’ve come to a bottom drawer purchase.
Andy, my full service broker called me today. There must be something about having an unused margin facility that makes these guys nervous ;). Anyhow he gave good spiel so I thought I’d give it a go.
Andy’s 5 good reasons to buy BHP under $10.00
Market should be up – Microsoft released a ripper result overnight
Spread of BHP and to BHP-Billiton suggests BHP has upside
The ADR’s had good night
Charts point to a break out through 9.80 with a target of 10.20 (maybe upto 10.60)
Moody’s lifted its rating for some of the BHP group
Following brokers tips is not the way to riches, but if you don’t take some of their tips they might stop calling. Not necessarily a bad thing that – but I don’t trade full time so things that save me time are good.