my favorite trade bill heimerdinger feb 25,2012 e mail [email protected]
TRANSCRIPT
THE HEDGE
A
WEEKLY
INCOME
STRATEGY
RISK DISCLAIMER
TRADING IS RISKY
PROCEDE AT YOUR OWN PERIL
“CAVAET VENDITOR”
WHERE
THIS TRADE CAN BE DONE IN ANY TYPE ACCOUNT
•TAXABLE•IRA•SEP IRA•TRUST
IT IS MOST EFFECTIVE HOWEVER IN A TAXABLE ACCOUNT
KEY ASSUMPTIONS
FED POLICYTHE FED WILL HOLD DOWN INTEREST RATES FOR
THE FORSEABLE FUTURE USING STATEMENTSAND QE 3, 4 5 ETC AND OTHER
BAD THINGS HAPPENWHEN BAD THINGS HAPPEN IN THE WORLD, PEOPLE
WILL SELL STOCKS AND BUY US TREASURIES FOR SAFETY DRIVING DOWN INTEREST RATES
AND DRIVING UP TREASURIES
BAD THINGS
EUROPEAN CRISES
IRANIAN CRISES
KOREAN CRISES
CHINA HARD LANDING
MAJOR TERRIORIST EVENT
VERY POOR ECONOMIC DATA
WORST OF ALL
BO RE-ELECTED
WHAT DO WE TRADE
TLTTHE 20 YEAR TREASURY ETF
10 YEAR TREASURY% YEILD
CURRENT RANGE
LOW MID HIGH
1.67 1.95 2.2
Approx TLT Level
125 118 117 112
TLT WEEKLY CHART
TLT DAILY CHART
TLT 60 MIN CHART
HOW DO WE TRADE
EVERY THURSDAY OR FRIDAY WE SELL
WEEKLY
TLT PUTS
AT THE MONEY TO TWO STRIKES DOWN
(STRIKES ARE AT 1$ INTERVALS)
CLOSING THE TRANSACTION
THE FOLLOWING WEEK WE TAKE ONE OF TWO ACTIONS
• THE PUTS EXPIRE WORTHLESS AND WE SELL NEW PUTS FOR THE FOLLOWING WEEK
• THE PUTS ARE IN THE MONEY AND WE ROLL THEM TO THE FOLLOWING WEEK FOR AN ADDITIONAL CREDIT
NUANCES
IF THE PUTS ARE CLOSE TO THE MONEY THEY CAN OFTEN BE ROLLED DOWN A STIRKE (WITH A
CREDIT) TO IMPROVE THE NEXT WEEKS CHANCE OF EXPIRING WORTHLESS
HOWEVER THIS LOWERS THE OVERALLRETURN
IN A SMALL TAXABLE ACOUNT OR AN IRA YOU MAY HAVE TO ROLL EVEN THOUGH THE PUTS WILL
EXPIRE WORTHLESS BECAUSE YOU DON’T HAVE ENOUGH BUYING POWER TO WRITE MORE
WITHOUT THE ROLL
KEY ISSUESSIZING OF TRADE – MAKE SURE THAT YOU
CAN STAND A RUN AGAINST YOU OF TWO TO FIVE POINTS
DO NOT SELL PUTS ABOVE 118
IF YOU ARE UNDER WATER FOR A WEEK OR TWO REMEMBER
BAD THINGS HAPPEN!!
RESULTS NOV THRU FEB
CALLS WINS NET LOSSES NET TOTAL TOTAL 7 $16687 4 $7485 $9222
AVG $ 2383 $1866 $ 838
PUTS
TOTAL 8 $15261 3 $1354 $13907
AVG $ 1907 $ 451 $ 1264
QUESTIONS