Sunday, February 2, 2014

Continuing to Roll C Covered Call

Financial stocks (Specifically both XLF and C which are held in this paired option position) continued at the end of the week.   Hence CCI harvested the option premium gained in the C Covered call and rolled the position as described below.
  • Bought back the Feb 28, $52.50 call in C at $.24 (capturing a modest $.18/contract profit)
  • Sold the Mar 7 (out an additional week), $51 call in C for a $.51/contract credit.
This position was initiated on  Jan 8, 2013. The performance of various potential holdings as of the time of this trade are shown below:
  • The XLF etf has been up with the rest of the market. Just buying and holding the XLF over this period would have returned a very nice 22.8 %.  
  • The leverage obtained by instead simply holding the Jan 15 $10 call would have generated an  unrealized, leveraged, capital gain of 58.4%. 
  • The leveraged, long/short strategy defined in this thread is up  54.3%.  An outstanding gain with somewhat less risk/leverage than holding a naked  LEAP.

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