Magic Moo Cow Game
- Thread starter Simon
- Start date
If it was, the blue line should track above the accumulation index by the option profit, not fall to the downside.
The blue line fall is more likely attributable to fund manager individual share selection risk, exercise risk, and option premium selection risk.
What was the advantage of the strategy over an index again?
I thought that's what could be discussed in this thread. Looking at the Covered Call Options in isolation, as far as I'm aware (happy to be corrected), only the above mentioned 3 scenarios [from previous post] can happen. Most of which involve you taking home bacon as long as they're written out of the money a month in advance. Happy to be corrected on that as well.
The underlying shares however have the same risk / reward / performance profiles as any shares do - regardless of whether you're writing calls on them or sending them flowers or whatever.
I've written otm calls over shares that are already part of my long term buy and hold strategy and it's my understanding that they increase performance/extract cash but I fail to see a scenario where the options contribute to losing money / going backwards. Are they using some other strategy than this?
Would love to hear more.
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Peter should know....May will be interesting.
funny that,
where is the 2-3% monthly income that every promoter harps about.
Over a year that should add 'in marketing' jargo, 20-30% a year.
Oh now i know, some months you may well get the income but you loose from capital losses.
Ah that now explains the graph.
Can this strategy work?
Yes in the right hands, but its not as simple as it sounds.
And its not consistent 2-3% income returns WITH 100% CONSISTENT RETURN OF YOUR CAPITAL.
What were the fees again?
And let's keep in mind fund performance is calculated with reinvestment of distributions, so those 2-3% intended monthly options returns should be compounding to the upside on the chart above.
Let's keep in mind what the blue line crossing below the black line signifies - the fund manager is failing to
1. time his moves between cash and shares sufficiently to beat the index.
2. keep options income high enough to cover the risk associated with point one, in addition to his fees.
I'll be sure to check what the May performance of CBA and MQG does to this fund's performance.
hmmmm.....
Hope I am not to far OT here but was listening to Nick Radge from the Chartist who also had an option trading strategy on the go for a while last year. He used the iron condor method i.e.
Sell 1 OTM Put
Buy 1 OTM Put (Lower Strike)
Sell 1 OTM Call
Buy 1 OTM Call (Higher Strike)
Which basically defines a band, if share stays inside the band you make money.
Main points I remember are
He traded it on american shares due to ridiculous brockerage here (especially important with the 4 legs of this strategy), parcel size is a lot less over there(100 shares), and liquidity meant 100's of available shares (his view was only around 7 could be reliably traded here). I think he only traded for a few months and return was around 30%? He did say minimum account size was 40k for this strategy. Am thinking about checking it out via an options express virtual account.
Thanks
Scott
Sell 1 OTM Put
Buy 1 OTM Put (Lower Strike)
Sell 1 OTM Call
Buy 1 OTM Call (Higher Strike)
Which basically defines a band, if share stays inside the band you make money.
Main points I remember are
He traded it on american shares due to ridiculous brockerage here (especially important with the 4 legs of this strategy), parcel size is a lot less over there(100 shares), and liquidity meant 100's of available shares (his view was only around 7 could be reliably traded here). I think he only traded for a few months and return was around 30%? He did say minimum account size was 40k for this strategy. Am thinking about checking it out via an options express virtual account.
Thanks
Scott
2.5%pm compounded options income over 7mths on 10k, would return $1,887.
MOO...
He did trade them monthly and says you need around 10k per spread so he was trading 4 spreads at a time have dug up the figures:
So, for those 9 months:
Start BaL: $40,000
End Bal: $48,932 (incl comm's)
ROI: 22.33%
# Trades: 52
Win%: 84.6%
Avg Win: $432
Avg Loss: -$1248
Pfactor: 1.90
Comm's have been on the high side at $66 per trade. In Jan reverted using the IB rates at $24 per trade.
No compounding has been used.
One interesting comment he did make was that we are hearing a lot more about covered calls this year and last because they all got killed in 2008, I am guessing volitility gave them a real spanking. Sorry I did hear how far OTM he usually went but cant remember.
Scott
I was elaborating the option income must be seriously underperforming the risk assocated with the FM's share selection.
How anyone can justify this result after the marketing I heard, is stretching a very very long bow.
Anyway, enough words. I'll just update the 4 funds' performance from time to time.
How anyone can justify this result after the marketing I heard, is stretching a very very long bow.
Anyway, enough words. I'll just update the 4 funds' performance from time to time.
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Moo still below the index and in the red, as are all of Excela's offerings.
of more interest are the goings on at Excela Limited (EXA).
Originally this was supposed to be a listed fund managed by Peter Spann through one of his management companies., it now seems to be acquiring Peter Spann's financial companies.
If you go through the independent experts report, apparently Peter Spann will pocket 30% of any EBITDA above $2.something million as part of his 'management' contract with the company.
Now thats not profit, just EBITDA
Originally this was supposed to be a listed fund managed by Peter Spann through one of his management companies., it now seems to be acquiring Peter Spann's financial companies.
If you go through the independent experts report, apparently Peter Spann will pocket 30% of any EBITDA above $2.something million as part of his 'management' contract with the company.
Now thats not profit, just EBITDA
Intrinsic Value,would you have a link to the independent experts report it seems either way some people win while others,anyone that can't see that the "DOW"is slowly tracking down again should not be in the market.
..willair..
just what is from the asx site:
http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=exa
Relevant announcements: 14/7/2010.
Signed off as being 'fair and resonable'.
but then consider, who paid for the reports??????
does this sound early familiar with the reports provided on credit ratings, the person who pays, is the person who 'controls within limiations' the outcome.
So theoretically, with the acquisition of an AFSL, Excela's brokerage services can take the other side of Excela fund hedges, and the commish.
Thanks for the link,that will keep me occupied for a while..willair..
