The purpose of this page is to provide option trading examplesincluding real life examples of trade adjustments and management. I've created this page at the request of a number of individuals who purchased The Essential Leveraged Investing Guide and who wanted to see more real life examples of how I select and then manage trades. I'm also including it as a free web page as a courtesy for those who are considering the Leveraged Investing approach using conservative option strategies to acquire high quality at a significant discount and then perpetually lowering the cost basis of those investments thereafter. In addition to general trade information, I also include extensive notes to explain the background of the trade as well as my motivation and rationale for various decisions and adjustments. The annualized returns are calculated by taking the amount of the "booked" return, dividing that by the implied capital requirement if I were to be assigned e. So here goes - the following is a sequence of trades originally initiated in the fall of on PEP. As you'll see, even though the share price seemingly went against me, I not only didn't lose money, but I also actually continued to make very good returns. I sold 4 Jan puts at the 65 strike price 2. PEP traded in the range of Over the next 3 weeks, the intraday share price move a couple bucks higher to the I had no other open trades on PEP for 6 months until I wrote 1 slightly in the money PEP May 70 put 1. I initially anticipated that the stock would continue to trade higher and didn't want to wait until the May contracts expired before opening June positions. This short PEP June 70 put and the one below it were opened while the May 70 put see above was still open. When I closed out both 70 short June PEP puts at 0. The stock traded trading I got very lucky on timing my trades the previous October see strategies first two entries abovebut clearly I would've been better off not closing the 2 June 70 puts early. The way I calculate "booked" returns is that I subtract the cost of rolling from the new premium received for a net premium received designation see trade below. I bought back the June 70 puts 1. This was another roll on my 2 short 70 puts, this time from the July cycle to the August cycle. With PEP trading between This is where it might start to get a examples confusing. I sold 4 Aug 65 puts 0. The net result was that these long Buying back the 4 long puts then changed the remaining short 65 puts from a bull put spread to regular naked puts see trade entry below. See trade entry above - this position of 4 short PEP Aug puts at the 65 strike price was originally part of a And as an additional trade off, selling the 4 long puts eliminated any further downside protection, but it also increased the potential gain from the short portion of the trade should the stock rebound. One more trading on the 2 short 70 puts. I bought back the 2 Aug 70 puts 8. This position was the result of a roll, but with a twist that I used to lower my overall risk. Instead of simply rolling my in the money short PEP Aug 65 puts to Sept 65 puts, I actually used the time decay advantage to reduce the number of short puts from 4 to 3. Here's what it looked like: But because I also had 2 additional short 70 PEP puts open, I felt it was more prudent to begin lowering my risk rather than trying to maximize my income which stock basically in the category of loose change on this particular trade adjustment. Strategies, I bought back the 2 puts at the 70 strike and these 3 puts at the 65 strike, and rewrote 5 short October puts at the More trade offs - here I rolled 2 Sept 70 short puts and 3 Sept 65 short puts into 5 Oct Trade off here is that I trading the strike price on the 70 puts to When you're managing an in the money naked put position, there are only two ways to reduce risk via rolling - either by reducing the number of outstanding puts or by lowering the strike price on those puts. In this case, after getting all my outstanding short puts at the In order to achieve this, I increased the number stock naked puts in the position from 5 all the way to 8. Still, I believe this was a good move, and that lowering the strike price a full notch from Much of my confidence stemmed from the quality nature of the underlying business. PEP is a world class business and while it was definitely out of favor during these last several months, the business model is still sound and it's a company that I'm confident will continue to generate consistent and growing profits for decades. If Examples didn't have such long term confidence in the company, there's no way I would be adding short puts or, in effect, "doubling down" on the trade and hopefully, I wouldn't have initiated any kind of trade on such a company to begin with. After lowering the strike price on my outstanding naked PEP puts from This was about a week prior to the November expiration. Because the share price had finally started to rise, I found that I was able to roll to December, decrease the number of outstanding puts from 8 to 7, and still maintain a net credit. In hindsight, I would have been dramatically better off if I had held off doing this roll until the final day of the expiration cycle instead of doing it a week earlier as I did. This really illustrates the power of the accelerating time decay at the end of an option's lifespan. I could have rolled to December 65, stayed essentially flat on the premium, and actually reduced the number of naked puts from 8 all the way down to 4. Or I could have even lowered all 8 of the November naked puts from the 65 strke to the Obviously, I wish I had waited now, but the rationale for my decision a week or so earlier was that was the first opportunity I saw to reduce the strategies of outstanding short puts. Could I have done a little better on the timing? This is a great example of how the closer to your strike price that a stock ends the expiration cycle at, the more lucrative and flexible future rolls become. I closed out the trade for a couple of reasons. The primary reason was to find a way to wrap up this example at a nice chronological stopping point i. And I was alos willing to close the trade nearly examples weeks early, because the final net premium income that I ended up booking resulted in a slightly higher annualized rate Although, I've been able to maintain net premium credits month after month even as I've worked to lower the strike prices on the rolls which sometimes required I expand the total number of stock putsit's still nice from a psychological standpoint to step back, claim victory, and know that I finally have zero exposure on the trade. Once the puts are at the money or close to it whether the stock rebounds or you have to lower the strike price on rolls yourself the trade really begins to works in your favor. In this example, I was able to generate substantially higher returns while simultaneously reducing overall risk i. The above option trading examples are a terrific illustration of how option trading, when used conservatively, methodically, in conjunction with high quality businesses, and all without panicking when things seem to go the wrong way, can still generate lucrative returns even as the trade seemingly goes against you and even as I failed to always make the best adjustments in hindsight. By the end ofthe trade was in much better shape than it was over the previous several months. Compare my results since September of to the hypothetical investor who purchased shares at that time. At the end ofthe share price was essentially flat. The only income he or she would have seen would have been in the form stock dividends. Don't look at the small number - look at the huge implications behind that small number. In effect, it would be income manufactured out of thin air. And what happens when you multiply the above over a full portfolio and over a full lifetime of investing? Do you see now why I am so optimistic about the future? Although I closed the final roll from this sequence of trades early at the end ofinTrading continue to write new puts on PEP and I continue to book additional premium income. Regardless of the zigs here and the zags there, I remain confident that I will always be able to meet one of either two objectives - strategies to generate additional booked premium incomeor if the options trade in the money, continue to lower the strike price on future rolling trades until the short puts eventually expire worthless, at which point I can then write new trades at a more advantageous strike price and subsequently generate much higher levels of premium income. No matter what, I expect to come out ahead of those investors who simply bought on the open market. And trading premium income I've received and will continue to receive in the future affords me many advantageous choices - from buying X amount of free shares matching the net premium received to date to allowing me to define the exact amount of a discount stock X mumber of shares I choose to purchase to even retaining the total premium amount as personal income. Finally, please remember that the above is what I consider a worst case examples of Leveraged Investing. What other system or approach allows you to generate these kind of returns even when you're wrong? That's because when you focus on only the highest quality companiesin my opinion, the downside is significantly limited because even in volatile and declining markets, the share price on high quality companies declines less and rebounds more quickly than most of the market's other average choices. Return from Leveraged Investing Option Trading Examples to Options Trading Education. Return from Leveraged Investing Option Trading Examples to Option Adjustment Strategies. Return to Great Option Trading Strategies Home Page. Warren Buffett Zero Cost Basis Portfolio Current Equity Holdings: KO - shares KMI - shares BP - shares MCD - 30 shares JNJ examples 25 shares GIS - 25 shares PAYX - 25 shares Open Market Purchase Price: Home Strategies Education Covered Calls Selling Puts Dividends Value Investing with Options! Option Trading Examples Adjusting and Managing Leveraged Investing Option Trades. Return from Leveraged Investing Option Trading Examples to Options Trading Education Return from Leveraged Investing Option Trading Examples to Option Adjustment Strategies Return to Great Option Trading Strategies Home Page. Options are always about trade offs. This time around, I held on to the previous position December much longer before rolling.
The Top 5 Technical Indicators for Profitable Trading
The Top 5 Technical Indicators for Profitable Trading
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For no Sect can easily arrive to such a degree of madness, as that it should think fit to teach, for Doctrines of Religion, such things as manifestly undermine the Foundations of Society, and are therefore condemned by the Judgment of all Mankind: because their own Interest, Peace, Reputation, every Thing, would be thereby endangered.
Fireworks and sparklers join the lanterns as they drift their way to the heavens.
Qualitative research explores attitudes and behaviour through methods such as focus groups and interviews.
For no Sect can easily arrive to such a degree of madness, as that it should think fit to teach, for Doctrines of Religion, such things as manifestly undermine the Foundations of Society, and are therefore condemned by the Judgment of all Mankind: because their own Interest, Peace, Reputation, every Thing, would be thereby endangered.
He will seek to redirect focus to areas where Australia can make a difference on its own, including water.
Fall of the Angels (Themes in Biblical Narrative) - Christoph Auffarth, Loren T.