Rick’s Strategy

Goals

  • Produce 12% return annually with option premium.
    • I want my option premiums to return 12% of my starting capital yearly.
      • Start with $20000
      • Year 1 premiums: $2400
      • Year 2 premiums: $2688
      • Year 3 premiums: $3010.56
  • Have my underlying holdings return 3-5%

Open position criteria

  • Position must return 30% annualy
    • All annual returns based on being able to use the money 12 times a year.
    • To calculate: (1+Return) ^ (12/number of expirations held for)
  • If dividend is included, yield must be greater than zero if called away early
  • Selling of first option should return 20% of initial investment
    • Removed on 1/6/2009 as the volatility collapse doesn’t allow profit on Deep ITM calls anymore.

Roll Up (and out) criteria

  • Rolling up (and out) must not decrease annual return

Underwater Positions

  • Calls 2 to 3 strikes out of the money will be sold on underwater positions