ETF Covered Calls 11-16-2007

What a spectacular week!  Since last expiry, I’ve pocketed $6000 in profits.   The volitility is absolutely amazing.  The ETF-Cashinator is working overtime crunching numbers.    It actually kicked out pretty much every ETF out there as a profitable play for the next 30 days.   There is so much fear and uncertainty out there that anything can happen.   My hope was to move to cash but I’ll likely try to lock in $4000 next month.

Here are the ETF-Cashinator picks for this week.

2007_1116_a.png 2007_1116_b.png 2007_1116puts_a.png 2007_1116puts_b.png

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11 Responses to ETF Covered Calls 11-16-2007

  1. The Travelin' Man says:

    Hey Slick –

    Sorry, I would have likely emailed this to you, but I couldn’t find a link to do so. As you know, I have been a reader for some time and occasionally post a comment, so I just wanted to offer some feedback about your system.

    In short, I love it. I drank the Kool-aid and I wanted to thank you for sharing your knowledge and obviously well-thought out research.

    My pool of available funds is significantly smaller than yours, but I am comfortable with the risk/reward that is in place for a percentage of my investable portfolio.

    I don’t know if you have access to a lot of historical pricing, but right after the October expiry, I purchased EWH at $21.85 and sold the $22 call for today for 90 cents. If called, it would have worked out to a little over 4% return for just under 30 days (IIRC). If you can find the one month chart for EWH you will see what a fun ride I had this month waiting to see what would come of this! Fortunately, the call was in the money for most of the month – sometimes by as much as $2+. I don’t know if I would have had quite so much excitement if it had been chugging down the whole month. End of long story – it finished out of the money, but respectable, and I plan to sell the $22 for DEC sometime next week and pocket a little more cash!!

    Yes, I understand that it is not free money, but if you consider that I paid $21.85 and cleared about $.85 after commission, I am still theoretically “up” about 50 cents on a stock that has dropped 35 cents since I bought in.

    So, this really is my long-winded way of saying thanks in the best way I know how – sharing a little bit of a success story. Cheers.

  2. Damian says:

    What other trades did you have on? I only saw the EWZ and UNG trades – and EWZ didn’t appear on your Cashinator report – so I was just curious how you chose that.

    Thanks for any additional info.

  3. The Travelin' Man says:

    Quick update to provide actual details (as opposed to what I could remember off the top of my head earlier)…

    Buy/write on EWH on 10/23 – 24 days to expiration
    Had EWH been called away, return would have been 4.62% (not bad for 3+ weeks!).
    Given current price of $21.50, return is still at 2.33% on a stock that fell 1.6% over the same time.
    Assuming I can write another call for about the same ninety cents, I can clear 8.56% if called away at $22 – for under 60 days of play.

  4. RichSlick says:

    Thanks Travelin’ Man. It’s all about learning how to invest prudently to achieve superior returns. I’ve traded currencies, bonds, stocks and a bunch of other things and the most profitable (and safe) way to invest so far has been ETF Covered Calls.

    The big downside to the “system” is it does require large capital to buy a large block of shares to sell calls on.

    There is something strange going on in the markets right now. The ETF-cashinator usually kicks out a page of ETFs but this last time it kicked out 6 pages. I only posted the top two.

    The volatility is through the roof and some people are whispering about a major drop in the market soon. If the market drops, it won’t matter too much for the long term investor but it might if you’re short term.

    EWZ is usually on the report and has been consistently there for some time but what might have happened is that it showed up on another day of the week. I run the ETF-cashinator daily but I only post the report on Fridays -it does change from day to day as equities move up/down.

    I have been working on creating a subscription service to allow access to the data daily for a fee but between a full time job, family and running a few blogs, development has been lagging and I’m not sure if the demand is there for me to invest time developing it. Besides, I’m now making about 4k to 6k with the system so spending time on a subscription service that might not generate 4k doesn’t seem like the opportunity cost is worth it.

    I appreciate the comments and feedback. Sometimes I wonder if all the work I put into this blog is worth it but when people comment in that they find the information useful and profitable then it makes all the difference.

    By the way, EWH has been consistently on my list as the Chinese government will allow Chinese citizens to invest in the Hong Kong market any day now. They’ve post-poned that ability numerous times now but its pretty much inevitable, when that happens EWH will surge in my opinion.


  5. Damian says:

    I am curious about how you manage risk – seems to me that if the market had continued the sell-off – say EWZ had continued to sell rather than reversing, how would you have managed that risk? A fixed % risk (such as, say 5% before you sold the position and bought the calls back). It seems to me that your system works well as long as the market continues an uptrend – not a criticism – just curious how you think about it.

  6. Damian says:

    Oh and you do not want to start a sub service – having been involved in 2, the pain is not worth the money unless you really enjoy explaining to some moron why they might have lost money on a single trade/event.

  7. RichSlick says:

    There are no guarantees in anything but over the long haul stocks, in theory, appreciate in value so as long as your window is long enough it shouldn’t matter.

    The advantage however is that if you’re selling a call for 5% premium then you already have a 5% insurance policy built in to your downside.

    In other words, I made 3% on EWZ last month, I’ll make 5% next month so technically, I have an 8% gain. I could lose 8% and still be at break even.

    I don’t buy an etf because it has a high premium, there is some research that goes into it. I’ve never traded XHB (housing) even though it has been high on the list every single month because I know housing is a bad play.

    EWZ is a resource/commodity play. Brazil is rich in resources and energy and I’m long on those positions but anything can happen.

  8. RichSlick says:

    I forgot to add that generally speaking, I try to sell calls in the money to ensure that my position is called. On the ETF-Cashinator report you’ll see green highlights around both the ROI and ADJROI columns, when both columns are green they typically represent an optimum ETF but then you need to do your due diligence before you trade.

    If I can be called on my options then I don’t have to worry about th ETF dropping in value after I’ve been forced to sell them.

    My ultimate goal would be to buy ETFs 10 days before they expire then get called and automatically make 2% to 4% every month with only owning stocks 10 days out of the month. I’m still working out the details to that strategy.

  9. Damian says:

    What’s the challenge there? Looks to me like that would be simple with your Cashinator – it seems to be a spreadsheet for days expiring and those options, in the money.

  10. RichSlick says:

    The challenge is that as you approach expiry, the calls become worth less and less and it’s rare that I can find one with 2% return in 10 days. It usually takes 30 days to get that 2%+ return.

    The cashinator is a simple program but its a database system not excel although I would imagine it could be done in Excel.

  11. Pingback: ETF Covered Calls - Dedicated to searching for optimum returns on Exchange Traded Funds via Covered Calls » ETF Covered Calls 11-14-2008

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