Part 1
The basic answer to ”would you please post your losses as well as your wins” is below:
The sum of all my option buy and sells for 2006 –
Realized gain for 2006: 56%
Unrealized gain for 2006: 27%
I have no realized losses for 2006, but I have some unrealized losses(~$-600) I’ll happily send you the line items if you send me an email address to send it to… [email protected]
…and then it all came crashing down! 🙂
Part 2
I think investors like you that are interested in options but don’t necessarily want to follow things day by day and deal with high % risk would be most interested in ‘writing covered calls’. I’ll post links at very bottom. I have a feeling you’ll REALLY like the concept. The tax guy I use was the first person to tell me about them… it’s sort of a best of both worlds, at least based on what I know about you(from reading your posts).
Here’s my attempt at an explanation:
You are long on COP and have 500 shares… You decide to write a covered call.. You sell 1 Jan 07 $70 option for the market price (right now they are $2.95).. This means you are now obligated to sell the person that bought the option from you 100 shares of COP for $70 in the 3rd week of January of 07. Each option represents 100 shares – so they give you $295 dollars for that option… if the stock price doesn’t go to $70 or above in between now and Jan 07, their option expires worthless and you keep the $295… if the stock price is $75 in Jan 07 or anytime before that, the person can take it away from you and give you $70 each for 100 shares(the stock could also be at $100 at this time)- they can then sell them and profit that $5 for themselves… So your risk is in opportunity cost, or as that Invest FAQ link puts it: “While the covered-call writer has no risk of losing huge amounts of money, there is an attendant risk of missing out on large gains.” and “My personal advice for new options people is to begin by writing covered call options for stocks currently trading below the strike price of the option; in jargon, to begin by writing out-of-the-money covered calls.”
