I've cracked the code...

[M.W.]

Pretty simple concept, ain't it.

I sort of see your reasoning,but lets start with the fact that a Covered call is a Short Put.If you look at it that way,if the market tanks and drops 150 SPY points,your balls out long,down 150 minus the premium taken in. Your next trade has no relevance.Its an entirely new position. The roll is meaningless.You should be asking what is the best trade available with the SPY down 150,not blindly/systematicaly rolling to make up losses.

Selling 50 delta puts has not outperformed the market the last 10 years. Not a terrible strategy,and obviously one you feel comfortable with,and thats an important factor.

 

[danielc1]

I sort of see your reasoning,but lets start with the fact that a Covered call is a Short Put.If you look at it that way,if the market tanks and drops 150 SPY points,your balls out long,down 150 minus the premium taken in. Your next trade has no relevance.Its an entirely new position. The roll is meaningless.You should be asking what is the best trade available with the SPY down 150,not blindly/systematicaly rolling to make up losses.

Selling 50 delta puts has not outperformed the market the last 10 years. Not a terrible strategy,and obviously one you feel comfortable with,and thats an important factor.

There is one tiny bit more to it. The drop doesn't happen in a day. So, when the premium gets to 25% of it's total, I'm rolling the whole way down... It is not so bad in the worst case scenario.

 

[taowave]

Seems to me like at some point you are locking in losses by rolling down from the ATM strike...

What sort of return do you think you can generate?

 

[danielc1]

Seems to me like at some point you are locking in losses by rolling down from the ATM strike...

What sort of return do you think you can generate?

Well, how do you calculate the return? For example, it took 32 months to get the invest back of one stock, and I'm still collecting every month the premium since more then 10 years. I usually shoot for a 1% premium, a month with a cushion of about 8% out the money.

 

[deaddog]

Well, how do you calculate the return? For example, it took 32 months to get the invest back of one stock, and I'm still collecting every month the premium since more then 10 years. I usually shoot for a 1% premium, a month with a cushion of about 8% out the money.

Compare account size at the beginning of the year to the end of the year.

 

[danielc1]

Compare account size at the beginning of the year to the end of the year.

In the last 25 years, an average of 17% returns, with a max of 35% and a min of -3%. Two losing years: 2001 and 2008.

 

[taowave]

If thats only the SPY Covered call,you beat the market and backtests..

In the last 25 years, an average of 17% returns, with a max of 35% and a min of -3%. Two losing years: 2001 and 2008.

 

[deaddog]

In the last 25 years, an average of 17% returns, with a max of 35% and a min of -3%. Two losing years: 2001 and 2008.

Great returns in my opinion.
If you only had a 3% drawdown you are doing really well.

 

[danielc1]

If thats only the SPY Covered call,you beat the market and backtests..

I did not do it on the SPY index. I used a combination of stocks. Mostly dividend stocks, sometimes stock that meet the canslim criteria.

I have also a question: how do you backtest this strategy? Just curious.. for so far I know, there is no data on options that go so far and what you get out of some rules in theorie is very limiting. How do you backtest for example the writing of an option and then in a week it gets to your buy back rule of 25% of the premium and you roll over for the next level of writing? I could never figure it how to programma that..

 

[taowave]

Interesting combo...

Im not a programmer, I use ORATS...

I believe they have option data going back to 07...

can definetly set stops and/or profit targets.

Havent run backtests on Buy writes,I backtest naked puts.Same difference,though there may be some rolling nuances with the Coverrd Call..

Take the trial, Matts a good guy

I did not do it on the SPY index. I used a combination of stocks. Mostly dividend stocks, sometimes stock that meet the canslim criteria.

I have also a question: how do you backtest this strategy? Just curious.. for so far I know, there is no data on options that go so far and what you get out of some rules in theorie is very limiting. How do you backtest for example the writing of an option and then in a week it gets to your buy back rule of 25% of the premium and you roll over for the next level of writing? I could never figure it how to programma that..