Hello MK:
I am looking at my open position in IOC. It is a covered call trade that is now ITM (in-the-money). C2 describes the short portion of the trade as being “very high” in risk. Somehow I can’t agree since I know the STO call option IOCGH is covered. In fact many of the stocks I choose to sell call options against are going to move up (as well as the option price) since moving ITM is good thing for our accounts.
I feel these short COVERED call positions should be labeled as “n/a”. After all, at first glance most sub prospects are going to dismiss this system as too high in risk - based on these labels?!?
Thank you,
Gilbert Arevalo
If your system makes good profit and has a nice equity curve then they won’t dismiss it that easily. At the moment they dismiss it for another reason.
Did you open the short option position before opening the underlying stock position? If so, you had – at least temporarily – an uncovered short option sale, and margin use was appropriately noted. The risk assesment shows the maximum margin use at any given time during the trade’s lifetime. If you eventually cover your short option positions, the risk assessment will still display the max (i.e. uncovered position) margin use.
According to this (and my recollection) the stock purchase was executed BEFORE the STO order was place. Gilbert
BTO 1,000 IOC
38.94 6/15/07 11:43
STC 1,000 32.88
6/26/07 15:33
($6,060)
n/a
($6,060)
**************************************
STO 10 IOCGH IOC Jul07 40 call
3.90 6/15/07 11:44
BTC 10 3.20
6/26/07 15:31
($3,000)
V.High
$700
Ah, you are absolutely correct. The "find max drawdown" routines do not factor in the fact that option sales can be covered. I will need to add that.
MK
Yes, MK Sounds good. Will be looking for your update regarding this.
Not that it matters - much, when your get ‘extreme’ stock positions like IOC did today. I factor this (extreme-action) in a couple of times a year (I swear!) Lllooollll.
Again thx
Gilbert
