Re: Small accounts and options.
I've started lurking on this thread last week or so and saw the discussion recently on small accounts and trading options. I thought I would share my experience over the last 1 1/2 years (a little less actually).
I used a call strategy of buying 10% to 20% OTM leaps on tech blue chips and rolling up when the return is 200%. I started this in my IRA in November 1998 (right _after_ most of the make-up for the Asia sell-off). I started with $9k cash at that time, and always have kept 50% of the account in cash (or now a mix of cash and stock). At this point it is about $60k (I have also contributed $4k more since). So, it seems like a pretty good strategy. Cisco in particular has been pretty good. I have rolled-up on Cisco as follows:
bought 1 @ 15 5/8 in Nov98, sold @ 51 1/8 in Jan99
bought 2 @ 14 3/8 in Jan99, sold @ 47 1/2 in Dec99
bought 4 @ 8 1/8 in Dec99, sold @ 29 today
Cisco has been the best one, but I have done roll-ups with Ascend-Lucent, Intel, and EMC.
My thinking on the strategy has been to buy LEAPS in order to survive any medium-term downturns and buy solid tech companies that just seem to always keeping going up to have a reasonable uptrend. I seem to get a 3:1 leverage versus the stock movement over the same period.
Of course, the fact that it is an IRA has two benefits. First, of course, the taxes. Second, I figured if I was going to do anything risky the IRA was the best place because that is my longest-term money (still in my 20's).
Just thought I'd share a small account to larger account success story. I have had a goal to (simply) double the account every year (which I imagine will get harder as the account gets bigger), so I am on track for now. If nothing else, the strategy I have used so far I think is a good way to jump-start an account to get it to a size where you can start to do more with it.
I will be starting to write naked puts in my regular account where I right now mainly hold common and have done another roll-up strategy on shorter term calls (buying 10% OTM calls 6 months out and selling 3 months out) on more dynamic tech stocks (e.g. jdsu). I had been thinking about the put writing for some time now, and after reading all of the talk here about it I am more than convinced.
Richard. |
