The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – DEC Results

Posted by mounddweller on December 17, 2011

Fellow Traders,

Our results this month are as follows:

(1) 262 trades met our selection criteria, 6 of which I singled out as recommendations warranting your further review.

(2) 27  trades (10.3%) finished ITM.  One of the 27, RSH, was one of my 6 recommendations.  This failure rate is higher than normal.  In most months 5% or less of the selections finish ITM.

(3) Premiums received, net of commissions, for the 262 trades was $36,175.10.  Entering all of these trades would have required a capital commitment of $1,970,070.00.  Net ROIC was 1.84% (23.94% annualized).

(4) Capital losses significantly ate into the net premiums received.  Losses from the 27 trades that finished ITM were $18,995.25.

(5) Net profits thus totalled $17,176.85.  This yields a ROIC of 0.87% (11.37% annualized).  This is a little bit below our normal rate of return.

Now I’d like to present a summary of our 2011  total results.

(1) This year the selection criteria produced a total of 2220 possible trades.

(2) 244 (10.99%) of the 2220 trades finished ITM.  Thus, 89% of the trades were successful.

(3) Net profits for 2011 totalled $165,899.95 using an average capital commitment of $1,437,182.92.  This resulted in an annualized ROIC of 11.54%.

Well, there you have it.  That’s it for 2011.  Which leads me to my next topic of discussion, namely 2012.  I have decided not to continue producing the Deep OTM NP Strategy.  I made this decision for the following reasons:

(1) The strategy consumed a considerable amount of my time each weekend.

(2) The results obtained by the strategy were not commiserate with the amount of time it took me to analyze and produce them.

(3) The underlying stocks of the selected trades were not ones with which I was comfortable commiting my own money.  I can not in good conscience continue to recommend trades for you that I’m not willing to commit my own money.

However, I am developing a new strategy.  This new strategy revolves around trading a select list of solid blue-chip, dividend-paying stocks.  I will be rolling it out soon.

Wishing all of my fellow traders the very best holiday season.  MERRY CHRISTMAS!

Regards,

Troy

 

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3 Responses to “Deep OTM NP Strategy – DEC Results”

  1. Irene said

    Looking forward to the new strategy.
    Irene

  2. Rich said

    Troy,

    I’m also looking forward to your new plan. Kinda what I’m doing by sticking to a short list of DOW stocks, mainly the Dogs of the DOW

    Rich

  3. Stephen Almond said

    I am SO pleased to read your closing remarks. Selecting stocks based on option premium and return, even with some careful further analysis, seems to be the wrong approach.
    Starting with a group of strong companies seems a much better tactic.
    Keep up the good work.

    Steve

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