I'll offer a variation on the theme. There is no edge implied in any strategy, but this will exceed the performance of the CC strategy under 1 sigma. Find a stock you'd like to own and sell the 30 delta calls x 2. Cover the position or buy wing-strikes should the shares hit neutrality: GS 214.20 L GS July 220C $4.00a Buy 100 GS at 214.20 Sell 2 GS July 220C at $4.00 [$800 credit] You're short the July 220 straddle synthetically at a $13.80. Your discounted cost-basis on the shares is $4.00 better than the CC, under the strike: CC cost basis: $210.20 Synthetic cost basis: $206.20 There is no free lunch -- the risk is symmetrical to the written-strike. $215 is the same as $225 on shares. There is some pre-exp drift due to the forward-spot, but that's eons beyond this thread. The synthetic will outperform the CC under all trials within one sigma. A basket of straddles will outperform a CC basket under all but a runaway bull market. This straddle methodology is bullish to the written strike, above which you witness a switch in modality. You have many hedge/offset options should spot = strike. You can buy the outside wings to effect a [likely] risk-free fly; you can offset the entire position at typically a better-mark than the CC; you can hold through expiration as you're at best-case PnL, etc... I chose to define the synthetic / the natural straddle to maintain continuity with your preference for buy/writes. Good luck.
Let it be said that I use a synthetic strategy only under circumstances in which I've seen gains on the underlying shares. As a rule, I will buy dgamma via wings [strangles]. I rarely carry unbounded risk.
System Details: Kingdom Capital Covered Call Fund Trades 8 Profitable 3 Losses 5 Win % 37.5% APD Ratio -0.42 Correlation w/ S&P -0.135 Cumu $ ($8,300) after typical commission ($8,640) Avg Win $600 Avg Loss $2,020 Profit Factor 0.2:1
OK guys...in all fairness if I am to accomplish the highest possible AVERAGE annual rate with a comparatively MUCH lower risk (day-to-day movement of Fund values in relation to a 50%+ - average - rate). And in keeping without the need for exhaustive research and analysis skills, atticus-type abilities, or time spent watching stocks (comfortably manage 4-6 positions - even in larger funds) Some 'gurus' have common sense (a little) figured out. There will be good markets (for this strategy) and bad markets. What works for others may not work for me at the time it does/doesn't - the way it does. Letting the market be THE guide for this strategy is the best of all world's. Takes (most of) the quesswork out. After all markets are for the most part are in a free, independent state (for lack of better description). So what do you do? March 2003 bottom was called within days of actual bottom - HUGE, since as YOU know 90% are calling it the other way...hence WE profit - THEY don't. 90-120% gains were easy with CC's and only borrowed for a few months up to half of cash account. As most all know markets don't go straight up. 4 out of 5 periods do but during corrections - minimize losses...which will develop quickly (at least for this strategist). At the tail end of a bull market 100 or 70 or 40 or even 25% gains may not be possible. But AVERAGING 50% over ALL periods IS HUGE. (like to see you do it lol). At this point in the market - even being invested is a precarious call for this manager. 5-15% drops off the top are expected if you do. I am again cashed out. An unfortunate 8% drop but expected. More not likely unless we headfake our way off the top - similar to headfaking our way off the bottom in 2002. But a manager worth his salt will know to achieve this loftly goal (I am not talking about 25 or 35 or even 45% AVERAGE annual rate goals OR system competitions to see who can make the most winning trades without a loss Or losers that rack up 600% and then lose it all back [DuH!!]) he needs to KNOW what he is doing. OR knowing how to make money a trillion different ways but to never get out of 2nd gear? (I know - Atticus, et al - I've spent a lot of years with NOTHING to show) If that were the case I'd just make 10% or so a year off a much larger account, without compounding it - and be happy to hang out with the computer. But I am trying to show something of "great" value. I know I am staying within the norm. I don't blame you for not seeing it or keeping up with near-term "failures". It's ALL good. So I am taking the higher call and doing what I need to do before all. After the froth is removed from this market, racking up these heavy gains will be that much easier (they already are) once all is said and done.PayS PS keep in mind we are at the tail-end of this bull market and the goal if accomplished will be sweet = gaining 25-30% higher than the Nasdaq each year. The gains (losses and then some) will be made.
Ol Gill, your website and performance are stellar. I want to sign up for a years of subs in advance. I also want you to manage my trust. I know you can do it. You've sold me Gil. Where do I wire the money to? http://youtube.com/watch?v=XMpC7wLOAOk
Seriously, Flipper you should (lol). Anyway I read a few of your posts a few weeks back. Not sure how the market is for you - most don't really say. GilL
Your methodology is several light years ahead of this thread. Not sure why you bother. You may have a better chance pushing the "combo to fly" play at the north and sedgwick curr ex.