Thursday, December 13, 2012

Rolled IWM Covered Call Out and Up

The Index Covered Call Trading Plan  (aka: ICC) is CCI's approach for managing a position of index ETFs and related covered calls.  The most recent trade against this plan is described below.  A reader can find details about the rational and management of the trades at the ICC trading plan tab on CCI's home page.

DESCRIPTION: iShares Russell 2000

TRANSACTION TYPE: Roll the December $79 call to the January $84 call
TRANSACTION RATIONALE: With IWM having moved up since the sale of the December call the December option was moving almost in lock-step with the underlying (i.e. delta over 90) and hence this option was no longer effective.  This trade took the loss on the option trade which partially offset the unrealized gain in the underlying (i.e. this strategy makes less when the market goes up)

TRANSACTION DATE: Thurs Dec 13, 2012

Action: Sell to Open
Exp. Date: Dec 22, 2012
Strike: $79
Price: $3.95
Action: Sell to Open
Exp. Date Jan 19,2013
Price: $1.00
Net debit: $2.95

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