Monday, September 16, 2013

Re-established Covered Call in C

As discussed here CCI has a long position in the financial sector etf (xlf) via the Jan 15 $10 Call, that has usually been hedged via a shorter duration short call in Citigroup (C).

Since the last post about this position here,  both the XLF etf and C have generally moved sideways. That means CCI was able to harvest option premium on C's  Aug 9 $52.50 covered call and then again on the Aug 23 $53 call.  With the market up this morning CCI re-established the hedge for this position by selling the Oct 4 $53 call for a $.32/contract credit.

Since inception on Jan 8, the performance of various holdings are shown below

  • The XLF etf is up a very nice 20.1%! (including dividends)
  • The leverage obtained by instead simply holding the Jan 15 $10 call would have returned 47.4%.
  • The leveraged long/short strategy defined in this thread is up 43.8%.
Obviously, being long a market that goes up 20% is going to be a good thing! (if only all my selections went 20% in the right  This approach, which doubled the returns with the leverage of the Leap while somewhat offsetting the related risk with the short call position, has worked well.   Stay tuned.

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