Today’s set up.
Please go to my other thread "Covered calls - Why it works(my opinion) Why it will not work (your opinion) " where you can discuss or give your opinion as to why this method will fail.
Just about 10 hours or so to expiration of the covered call.
One of two things will happen at that time.
- It will exercise.
- It will expire.
In case 1 when it expires, we will make 62 pips.
In case 2 when it expires, we will make 64 pips.
Please post comments or questions on the other thread.
CallT
We have managed to achieve profitability of $6,724 in just about a week.
This works out to about 672 pips without figuring out which direction the market will go.
We will take a break and start the next set up after the weekend and take a long weekend break here.
CallT
Was supposed to just take a long weekend off but I just wanted to show that it is perfectly ok to hold a covered call position over the weekend and still not end up with a disaster.
If you have a violent reaction to this, take me up on it on the other thread and I can give my take on it.
We went into one lot of the covered call for expiration on Monday 26th.
We have an assured 63 pips profit no matter where the market ends up. Here’s hoping that the market will go adversely against the underlying position and I can show the steps to take as a countermeasure to persist until a profitability occurs.
CallT
Calls expired so the 63 pips have been earned. As the underlying would now have an unrealised loss we go
into step 2 of the strategy and set up 2 lots of the covered calls for 106 pips and expiration 27th September.
CallT
Calls exercised. Another day another winner. Profit $8,046.00
Will be doing another set up today.
CallT
Calls were exercised for another winner and we geared up to 2 lots now.
CallT
We are now seeing a very severe adverse move of some 200 pips against our position.
In any trading situation where one gets a 200 pip adverse move, it can only spell a one way trip to disaster.
We have used this opportunity to cost average into the position. In any other strategy, if you do this and the market continues to move against you, you are DEAD. You will get a margin call and no way out of the disaster.
We have a continued adverse move and went into another cost average. Margin is only 15% of assets and we are position for a further cost average if we see the opportunity.
With any adverse move, you would carry a drawdown and if you increase size going into the drawdown, you invariably will end up with an increase drawdown. Our drawdown in this particular case is 8% which is very mild and that is the reason why we are looking it as an opportunity to cost average it again if we see fit.
CallT
Massive move against the underlying !!
This strategy has now taken 2 back to back big moves against it. Most strategies would not survive this.
The thing to note is that this covered call strategy DID NOT have a margin call right through the 2 big moves that rocked it.
There is a significant drawdown but there was no margin call threat at all and margin is now about 35% of assets. Not desired but also not uncomfortable.
Calls expired and we did COST AVERAGE into the strategy so we INCREASED the size. This is not a bold reckless move but a calculated one as this strategy has in the past been observed to withstand moves much greater than these and was robust enough.
Watch for this to possibly provide a surprising turnaround.
CallT
Yikes
If that were real money and my wife saw that I would have some explaining to do!
Ahhh…I don’t know your domestic situation but I for one would not mix domestic with business.
CallT
True
No matter if you lose 40 grand in a week and jump right back in pretty soon you’ve got nothing to mix domestic or business.
Averaging in is a strategy I have used in forex with small trade sizes. I have never traded options. Its an ok part of a MM scheme if you have some kind of limit. When do you put the brakes on? You seem to be going for broke pretty fast. It may work this time and next time but if you dont have an amount of loss defined that will make you get out its gonna be the whole account at some point.
I would never use cost averaging with trading raw forex. I would have no problem using it with a covered call strategy. I have experienced the workings of this strategy in particular through a sustained adverse move of 2400 pips. The strategy survived without a margin call.
It will sustain this move without any problems.
CallT
Calls expired and we increased size again going in.
CallT
who is your broker?
Some 15 hours to options expiration and it looks like we will get an exercise assigned this time around.
If that happens we would be reducing size for the next round.
Broker is SAXO
Calls went into exipration with an assignment and we earned the premium.
We have reduced somewhat our position and it looks likely we will have the same happening at this coming dateline.
The most nail biting event in any trading system is when one has to sit through a drawdown and wait for when to cut the loss. It is a different feeling when one knows that point will never come and this can only be found in the covered call strategy done correctly.
CallT
Just about 4 hours to expiration and it looks like we will end this round with a good profit that will wipe all positions out.
We might then just stay on the sidelines for the NFP.
CallT
Calls exercised as expected and our position is now neutral.
Profit of $15,453 or in pips 1545. Granted this is not as impressive as the other systems here doing 5000 pips a month or 1500 pips a day but 2 things stand out about this very old covered call strategy that is worth a second look if you have discarded it long ago.
- There is no need to figure out where the market is headed.
- There is no concern for any adverse moves.
CallT
We position ourselves for opportunity today.
2 lots covered calls.
CallT
