Is anyone playing it?
Love to have a talk if you are.
Cheers,
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.