Jaunty, It was over 100% on the entire portfolio. I was very lucky to have several of the put positions earn more than 1000%. Micron, Picturetel, Altera, Presstek, all the SRAM stocks, all the graphics chip stocks, etc. Some positions were duds, but when I lost, I never lost more than 100% of a long put premium, which is the key to this strategy. Puts on stocks like US Robotics hurt me in 1995 and Compaq and Dell wacked me in 1996, but they were nothing compared to the winners.
What some folks don't get is that you sometimes make a huge return in a fairly short period of time. Then, I book profits into the 90% portion and some into the other portfolios, and have bigger bets as the whole has grown. For example, ISSI was at $71 when I both shorted it and bought puts. The stock collapsed almost overnight and kept going. I was able to roll that one and take nearly 10% of the profits and plow it into the graphics chip cos. When you get a move on a steamroll, it can be like a very profitable, restrained pyramid. Ditto for a Micron, which not only fell from $95 to $17, but had several dead cat bounces that allowed me to play again and again. In fact, one of the reasons I got hurt a little on MU in 1997 was because I had done so well in 1995 and 1996. I could be reckless. And, silly as it sounds, that constant ka-chink from the money markets adds up over the course o a full year.
What is really strange is that a lot of the money I made in those good years, and in this good year, is from 1/3 put positions, not full positions. Yes, the % does matter. But when you get a Citicorp to fall $90 and you are rolling down out of the money puts that cost $2 to $4, the %ages add up very fast. Even the $10-18 premiums on the DRG add up fast when the index falls 100 points.
The big problem with long options is that it is a streaky game. By all accounts, I should have had a banner year in 1997, but it just didn't work out that way. Bad picking on my part, which is always a risk. A few winners offset a lot of losers, but 1997 was the first time I've ever seen my 90/10 underperform the S&P 500. This year, it is no contest. Of course, I have to remember that had the 90/10 been a mutual fund, I would have been fired last year and we'd never have seen this year's profits. <G>
MB |
