Kushi, I cannot talk about my current income positions as that information is exclusive for my partners. As the old saying goes, you can't sell what you give away. That is why I talk so much about 90/10 and my capital appreciation portfolios but only mention the income portfolio vaguely. However, I would like to talk about one position I just removed so you can get an idea of what I am doing.
Back in April I didn't like Starwood Lodging (HOT). I wanted to do credit bear spreads on the stock. So, with the stock at about $51, I sold August $50 calls short and bought $55 calls. The credit I received for the standstill position was $2 1/4, and I put up $5000 as collateral in addition to the $225 per contract. Of course, I received money market interest at about 5% the entire time.
However, I did not do the spread 1 for 1 at the start. I did it 1 short call to .8 long calls, as I was a bear. The stock almost immediately took a dive to $45 and change, at which time I bought the rest of the $55 calls. I also sold $45 puts and bought $40 puts at the same time, this time doing a 1 to .8 in favor of the long puts and put up another $5000 per contract. The stock hiccuped, which allowed me to lift some of the short leg and carry more of the long puts as free baggage until the next downturn. When it went back to $49 or so, I also sold the .2 of the calls I had purchased earlier.
I made similar moves several times in what was effectively a low risk butterfly spread that often had uneven wings. I must have done 20 trades during the 4 month life of the spread. Yesterday the entire position hit expiration day and I totaled my return. I ended up making 12% on the option gains vs. the cash collateral. Yes, you can annualize that, but I know better. That was a very good trade and I am unlikely to be lucky enough to make 36% over the course of a year. However, I did book the 12% on the options and collected about 1.6% interest on the cash over the 4 months or so. I can now afford to sit back on that money and wait for another layup.
These trades don't always work that well, and some are even small losers, but, with my large collateral position and the ability to trade in and out, I am taking very low risk to generate income returns in the 14-19% range nearly every year, bear or bull market. I'm sure there must be other folks who do this sort of thing, but danged if I have ever met them. <G> The bad news is, this type of trading is almost like having a job and it takes a lot of my time.
Hope that helps and sorry I can't be more specific about current positons.
MB |
