Trading around a position using covered calls Trading around a

57 Pages·2011·0.55 MB·English

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uussiinngg ccoovveerreedd ccaallllss
Roger Manzolini
June 23, 2011 1
Money and Investing
(cid:1) Trading around a position using covered calls
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June 23, 2011
Roger Manzolini
June 23, 2011 2
Disclaimer
(cid:1) This presentation is the creation of Roger
Manzolini and is to be used for informational use
only
(cid:1) Roger is not a certified financial planner nor a
ffiinnaanncciiaall aaddvviissoorr ooff aannyy kkiinndd,, ssoo uussee ooff tthhiiss
information is at your own risk
(cid:1) None of the information provided should be
considered a recommendation or solicitation to
invest in, or liquidate, a particular security or
type of security
Roger Manzolini
June 23, 2011 3
More Disclaimer
(cid:1) The content in this presentation should not be
considered as a recommendation to buy or sell a
security
(cid:1) All information is intended for educational
ppuurrppoosseess oonnllyy aanndd iinn nnoo wwaayy sshhoouulldd bbee
considered investment advice
(cid:1) Options involve risk and are not suitable for all
investors. All rights and obligations of options
instruments should be fully understood by
individual investors before entering any trade
Additional caution: My peers call me Maddog
Roger Manzolini
June 23, 2011 4
Agenda
(cid:1) Introduction
(cid:1) Option Basics
(cid:1) Covered Calls
(cid:1)(cid:1) TTrraaddiinngg EExxaammpplleess
(cid:1) Comparison of Approaches
Roger Manzolini
June 23, 2011 5
Introduction
High Level Strategic View
Portion of money
to be managed
10% but not more Money Options used to generate money
than $30K Engine High risk/high return (30% or more)
Investment Stocks / Bonds used to grow money
75-50%
Portfolio Moderate risk/moderate return (8-12%)
CDs / Treasury Bills used to
15-40%
Savings Portfolio
preserve / protect money (1-5%)
Roger Manzolini
June 23, 2011 6
Introduction
Market Composition
12 Sectors Basic Materials Capital Goods Conglomerates Consumer Cyclicals Consumer Non-Cyclicals Energy Financial Healthcare Services Technology Transportation Utilities
102 Industries 11 7 1 12 8 4 10 4 25 11 6 3
14,387 Stocks 2,032 635 90 479 406 1,054 3,674 1,243 2,296 1,990 226 262
1 207 105 90 70 37 57 122 708 78 224 11 164
2 26 37 28 49 83 23 158 101 34 43 71
3 62 84 45 27 712 52 33 369 38 48 27
4 23 42 44 15 202 22 344 76 49 20
5 23 159 91 175 127 296 347 38
66 11,,004455 119977 2255 1122 118833 3388 2288 6666
7 48 11 43 79 2,252 66 266
8 384 15 12 43 49 17
9 y 81 12 649 75 129
10 ustr 92 83 201 19 272
11 nd 41 15 345 586
12 h I 8 57
c
a
13 e 41
n
14 ks i 102
15 oc 65
16 St 46
#
17 33
18 26
19 50
20 11
21 119
22 16
23 62
24 57
25 99
Roger Manzolini
June 23, 2011 7
Introduction
Basic premise
(cid:1) You’re familiar with typical buying, holding and
selling stocks
(cid:1) Portfolio performance can be improved over that
typical approach through the use of options
(cid:1) You can set up positions where you are paid to:
(cid:2) Hold your stock as you’re accustomed to, or
(cid:2) Sell your stock at a profit
(cid:1) The risk is that you give up the potential
opportunity of making more money
Roger Manzolini
June 23, 2011 8
Introduction
Understanding stock transactions
(cid:1) Profit (loss) from a
Profit
“buy stock”
transaction
(cid:2) You’re “long stock”
(cid:2)(cid:2) ii..ee..,, yyoouu bboouugghhtt
stock with the
$0
intent to sell it in
Stock price
$30
the future at a
higher price to
make a profit
Note that there is no time limit
Buy low, sell high
Loss
Roger Manzolini
June 23, 2011 9
Introduction
Understanding stock transactions
(cid:1) Profit (loss) from a
Profit
“sell stock”
Note that there is no time limit
transaction
(cid:2) You’re “short stock”
(cid:2)(cid:2) ii..ee..,, yyoouu ssoolldd ssttoocckk
that you didn’t have
$0
with the intent to
Stock price
$30
buy it back in the
future at a lower
price to make a
profit
Sell high, buy low
Loss
Roger Manzolini
June 23, 2011 10