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Re: Writing covered calls
Old 12-26-2006, 10:41 AM   #121
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Re: Writing covered calls

Quote:
Originally Posted by whitestick
heavier use of margin
whitestick, you are using margin in this strategy ?? ?? !! !! !!

Margin amplifies the impact of the downside risks that you choose to ignore. Take all my warnings, and multiply them by that leverage factor.

Using margin while holding a basket of volatile stocks can wipe out an account faster than you can say 'where did I put Kim's phone number?'

You are playing with fire. Fire and gasoline. Lotsa fun in an up market. Enjoy it while it lasts.

-ERD50
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Re: Writing covered calls
Old 12-30-2006, 06:30 PM   #122
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Re: Writing covered calls

Not sure how well researched this is, but here's an article on covered call funds.

http://www.onwallstreet.com/article....=ros&print=yes

Quote:
Since fall 2004, more than 30 buy-write funds that have amassed a total of about $20 billion in assets have been rolled out.
Quote:
Fund companies started with the basic idea of buying a portfolio of diversified stocks and hedging it with options. Over the last year-and-a-half, the model has been tweaked to buy indices, as well as individual stocks, and write calls on both.
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Re: Writing covered calls
Old 12-31-2006, 12:31 AM   #123
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Re: Writing covered calls

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Originally Posted by lazyday

Such so-called "buy-write" funds boast yields of about 8% to 9%, with some as high as 10%.
but...but...but... what's the "total return" signed ERD50 : : :
Thought I'd save him the trouble
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Re: Writing covered calls
Old 12-31-2006, 09:18 AM   #124
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Re: Writing covered calls

Well, that article was written for financial advisors, and read almost like a sales pitch.

Just posted it for the quotes in my post above, on the magnitude of these new sellers of covered calls, and the notion that they felt compelled to switch from buy-write on individual stocks, to also use indexes. (Maybe not enough liquidity for all the covered call selling on individual stocks? Or maybe just to keep expenses down.)
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Re: Writing covered calls
Old 12-31-2006, 09:20 AM   #125
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Re: Writing covered calls

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Originally Posted by whitestick
but...but...but... what's the "total return" signed ERD50 : : :
Thought I'd save him the trouble
No trouble at all. And, I guess I don't get the 'joke'? All mutual funds present total returns per SEC guidelines - unlike Kim Snider or compoundstockearnings. And mutual funds don't get to pick the time frame either. It is publicly available information. What's funny about that?

I've mentioned BXM before, here's one that was mentioned in the article (ETV):

http://www.eatonvance.com/alexandria/2412.pdf

1 Year Total Return 9.70%

Since Inception Average Annual Total Return 11.67%


They yield about 11% on the original investment ($.475/Q), share price is up about 1.6%, but has been down also.

Any fund you might want to invest in has that info for the looking. Here is a study on BXM : http://www.cboe.com/micro/bxm/IbbotsonAug30final.pdf

Now, what would be enlightening (and maybe funny) is to see Kim's 'total returns since inception', including the down years of 2000-20002. Oh, but she just 'can't share that info', can she? Now that I find 'funny', but not 'funny like a clown' funny.

-ERD50
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Re: Writing covered calls
Old 12-31-2006, 11:59 AM   #126
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Re: Writing covered calls

Quote:
Originally Posted by ERD50
No trouble at all. And, I guess I don't get the 'joke'?
Just referring to the words in the article that talk about "yield" rather then total return.
Re: your Kim comment, have you called her yet to discuss?

Based on your comments about compoundstockearnings, I have been perusing their "flame wars" and can see where some of your comments are based on. BTW, I half expected to see you commenting in there, or maybe you do under a different signature.
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Re: Writing covered calls
Old 12-31-2006, 12:09 PM   #127
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Re: Writing covered calls

Quote:
Originally Posted by whitestick
Just referring to the words in the article that talk about "yield" rather then total return.
Re: your Kim comment, have you called her yet to discuss?

Based on your comments about compoundstockearnings, I have been perusing their "flame wars" and can see where some of your comments are based on. BTW, I half expected to see you commenting in there, or maybe you do under a different signature.
not yet, with the holidays I have many, many more important things to do. But I will. Crystal Ball says I will learn nothing, just reaffirm what I already know - we will see.

I have read through some of the CSE thread - there sure are a lot of people willing to ignore total returns. I don't think that's funny. I feel sorry that they are so willing to delude themselves. -ERD50
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Re: Writing covered calls
Old 12-31-2006, 12:21 PM   #128
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Re: Writing covered calls

Quote:
Originally Posted by whitestick
but...but...but... what's the "total return" signed ERD50 : : :
Thought I'd save him the trouble
From Whitestick...... his return...
2005 69.3548%
2006 60.9524%

OK.... can't stand it anymore... I have to call bullsh*t on this.... There is no way you can have a total return of 70% and 60% the last two years doing covered calls..... THERE JUST IS NOT THAT MUCH PREMIUM ON THEM... I don't care if you were leveraged or not...

So, you lose all credibility with me with just those two numbers above...

It is either your math that is bad or you really really think you earned that amount... if you think you earned it.... I have a bridge for sale.... slightly used...
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Re: Writing covered calls
Old 12-31-2006, 02:02 PM   #129
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Re: Writing covered calls

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Originally Posted by Texas Proud
From Whitestick...... his return...
2005 69.3548%
2006 60.9524%

OK.... can't stand it anymore... There is no way you can have a total return of 70% and 60% the last two years doing covered calls..... THERE JUST IS NOT THAT MUCH PREMIUM ON THEM... I don't care if you were leveraged or not...
Texas Proud - I agree that the numbers look improbable, but I won't go so far as to say impossible. These are out-of-the-money calls, so if your stocks are mostly rising, you will take in premium plus some appreciation in stock price. Couple that with margin leverage, and it could be possible in 2005 and 2006. But things would need to go your way, pretty consistently, month after month.

Of course, that same recipe would very likely wipe you out in 2000-2002. It takes volatile stocks to get good premiums, and out-of-the-money calls provide NO downside protection (beyond the premium received).

However, I really wonder about whitestick's sudden ability to correctly calculate total returns after all the variable accounting we have seen from him:

Quote:
Originally Posted by whitestick
I have had the worst ones end up being in the 10-12 % range. The majority are well above 20 - 25 %. Overall has been a bit above 20%. And that includes adding in the uninvested funds as well - in other words, the total stake available. .

(ERD50: Ok, maybe that was not annualized, but then we have this


my total percentage return is 41.142857% divided by 2 for the 2 years or an annual total return of 20.571429%.

(and)
Just to point out the problem with your method, I have percentages from one month to the next, using your formula, of 78% to 180% reflecting unrealized capital gains and losses intermixed with income.
I do have trouble understanding how you could have a 180% gain in one month when you have sold calls against your stock. Any one-month out call with a strike that is at 2.8x the underlying that would sell for anything would be, by definition, an extremely volatile stock. One that could easily go to near zero if the news driving the volatility went against it.

-ERD50
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Re: Writing covered calls
Old 12-31-2006, 04:05 PM   #130
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Re: Writing covered calls

ERD50.....

Yes, you are right... there is a POSSIBILITY... but not very probable at all...

How much premium are you getting in an out of the money call Not that much IMO... and if it goes up, you no longer have the stock...

But, then again I could be very wrong in that I am thinking it is his whole portfolio instead of a small percent.... I actually made 68% a few years back without leverage or options... but it was in an account that only had $10K... I would not be bragging that I made that percent for the year my portfolio was just a tad over the market...
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Re: Writing covered calls
Old 01-01-2007, 02:04 AM   #131
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Re: Writing covered calls

Quote:
Originally Posted by Texas Proud
From Whitestick...... his return...
2005 69.3548%
2006 60.9524%

So, you lose all credibility with me with just those two numbers above...

It is either your math that is bad or you really really think you earned that amount... if you think you earned it.... I have a bridge for sale.... slightly used...
Ah! Finally! someone saw the joke. I do not pretend that this is correctly done, I only took the simplest math exercise as requested, of taking the beginning account number, subtracting the difference from the end account number and dividing that number by the beginning number. I made NO attempt to clean it to reflect what I believe that the total return should show, which is to include and exclude withdrawals, additions, unrealized gains, losses, premium income due to other factors, etc. That was simply a frustration reply to the request.
As to some of the reasons for the higher numbers, the totals include puts as well as call writes, some amount of covered calls against some margined stock, and an occasional mistake when I sold a naked put only that had some really high premiums, and I never completed the transaction by buying the underlying stock and selling a covered call. That was pure luck that it closed out higher and expired worthless, without having to commit more then potential margin funds, which of course I didn't have to pay for, since I didn't exercise. Even a blind squiral finds an acorn occasionally.
I also had some stock that I transferred in at a long term hold, with a very low basis cost, and sold the call at one strike above the then current selling price, before getting called, which resulted in extremely high percentages.
I consider those anomolies and should not be included in the total returns calculations, when I back all of that trash out, thats when I get that 41% number over two years, that I referred to earlier. Now if you want to discuss the validity of that 41% number, which when you divide by the 2 years, gives an appoximate 20.5% annualized, I'll be glad to defend that as "pure" and reflective of actual results.
This is why I use yield for each closed position, and measure against that.
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Re: Writing covered calls
Old 01-01-2007, 11:54 AM   #132
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Re: Writing covered calls

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Originally Posted by whitestick
Ah! Finally! someone saw the joke. I do not pretend that this is correctly done, I only took the simplest math exercise as requested,
whitestick, at this point you are either being ignorant, obstinate, wallowing in self-denial, a shill for kimsnider.com (you are doing a lousy job at that, btw) or all of the above.

No one ever suggested that 'total return' is calculated w/o regard to deposits/withdrawals - I specifically mentioned that in my posts. Your insistence in twisting simple things is ever more evidence that you have something to hide, or something you wish to ignore.

So, you think it is 'funny' to misrepresent your 'total return' numbers while we are trying to engage in an intelligent conversation regarding the risks and expected performance of a covered call strategy? I am neither amused, nor surprised at this point.

I guess Kim and the compoundstockearnings guys and others will be doing a bang-up business as long as there are more people like whitestick willing to pay $$$$ to be told to ignore fundamental economic truths, and to 'trust' them that their systems work, w/o any meaningful performance numbers.

I will still wish him well - I can only hope he smells the coffee before a big market downturn wipes him out. If not, I hope he can see the 'humor' in an empty nest-egg.

I should have given up long ago, but I like to give people the benefit of the doubt. That post and it's 'explanations' removes any remaining doubt as to the futility of continuing this 'conversation'.

Over and out on this topic. Happy New Year -ERD50
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Re: Writing covered calls
Old 01-01-2007, 02:49 PM   #133
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Re: Writing covered calls

Quote:
Originally Posted by ERD50
whitestick, at this point you are either being ignorant, obstinate, wallowing in self-denial, a shill for kimsnider.com (you are doing a lousy job at that, btw) or all of the above.
I decided that for the new year, I'll just wait until there is a consensus that we have had a "bad year/s", that I am trading in, and report those numbers. That will remove, perhaps, much of this prediction of what will happen, and replace it with, what actually happened to me. Perhaps by then, I will have a seperate account that I can hold untouched for a year or so, and that should make it easier to derive the total return numbers around it. Apparently the effort that I went through to get to the 41% is not given any credit for it's value, so I can stop even trying.
Happy New Year to all, and on to another topic for now!
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