I have for about 3 months. Doing some real trades via FF and also solo. This month is big test for me to see how I handle having written calls for shares with strike price a long way below original purchase price....
As for the game, despite some technical issues it is a good learning tool with feedback from the brokers.
I have a buy and hold share portfolio and dabbled in some trading a while ago but I have always found it hard to get my head around writing options. But I am aware that they offer a low risk avenue of creating income.
I am a reasonably smart guy but find I learn more by doing than by reading articles. So was hoping the game would do it for me. But is an expensive way to learn - esp if I learn enough to decide it isn't for me.
I'd love to know someone here in town that I could sit behind and just watch them doing a trade and ask them questions - is this kinda what the game offers?
Yes, with detailed examples of trades made every month. Questions are usually answered by the FF brokers, Mr Spann also adds info along with details of his personal trades in the real world, that is quite worthwhile.
Making the trades is easy, with a broker, for that matter even without one. The basic strategy is also straight forward but like with all things that appear simple the subtle skills will probably take a long to time to gather. Strike prices are set about 2% above purchase, and they need to be to pay for 1.1% brokerage in and of a trade.
As for the game, I would definitely recommend it. At $1200 it would be way too expensive but I got that back in free brokerage in the first few trades with FF as part of the deal. There is no pressure to use or stay with them (and being full service brokers the fees eat into profits), so you can get your "free" brokerage and still play the game. Of course while you are learning the wrong trade would cost you much more.
I "played" it live, with real shares and real money - on margin! Let's just say it didn't end well!
That is not a reflection on the strategy, but a reflection on my trading/investing personality. And buying shares on margin for this strategy obviously adds to the risk.
What I found difficult to manage was the buying 12 month put usually cost 3 months worth of call premium, assuming the call didn't go ITM by exercise date. If I had to roll up and out, then there goes another month. Add on the interest and I was going backwards. (OK, OK, so I geared up too high, and didn't see 2008 coming... )
The other factor was the brokerage. I was using a full service broker (MacBank) and while the broker himself was great, the fees just ate into the premium.
For example, I was using 1000 NAB @ $30 and 1500 NWS @ $15(?). By the time I got say, 25c for the NAB ($250) and paid $93.50 brokerage, that didn't leave much left over for me! And I think we were getting about 18c for the NWS, so similar numbers.
From my (somewhat) limited experience, I think you need a serious sized parcel of shares, owned outright, to make it worthwhile.
And the strategy is a double-edged sword; you want volatility to be able to maximise the premium received, but not so volatile that the share price continually pushes the written call ITM.
I am in the game but have been using a covered call strategy for about 7 years. For the first few of years I was selling options about 7 months of the year but then committed more money to it now and i am selling my options every month. It is generating about an average wage per month from premium (milk or rent), in addition am realising some capital gains on being exercised mixed with some losses if the shares drop.
I've posted here a few times about using the covered call/buy write strategy.
I have combined the covered calls with writing naked puts (using cash as collateral) for the months when i had been exercised.
I like the strategy and will continue to use it to generate income.
The game I guess is expensive but it is a simulation of the real thing, you do get access to PS and the FF team for advice. Game entry fees go towards your brokerage when you use real funds for the strategy. Brokerage costs will soon eat away the game funds, especially when it is 1.1% on buying and 1.1% selling the shares, plus the $88 for options brokerage.
Personally I use commsec for cheaper brokerage 0.12% when buying, and 0.35% if exercised on covered calls/naked puts, and $34.95 for each options trade.
Difficult to say. The first month i did it I arsed it up because I didn't know what I was doing (still don't really) I started with 100,000. With my Calls written i'm down to about $95k, so I have some catching up to do.
Not really sure how ya went backwards with it, there's 3 different outcomes as far as I'm aware:
1) Share price goes up and you get exercised - meaning you have to sell the share at the higher price (which is hopefully higher than you bought it for)
2) Share price stays the same and you walk away with your Call premium and do the same again next month
3) Share price goes down and you make a paper loss on their value, but still keep your Call premium. This isn't so bad if they're quality stocks worth holding onto long term. Dangerous if at high LVR on margin loan.
Was your loss one of those scenarios or something different?
I sold the wrong call options, not realising the premium received was in the negative when brokerage was taken into consideration. Also I bought BHP before the drop so my paper value went down. Thats why I show backward movement.
That was the first month, I've done 2 months more since then and seam to be getting the hang of it