I used a template developed by one of my colleagues in the Covered Call Community - the basic framework is available from the Yahoo Board "Just Covered Calls." I see it as a living document - I'm sure my approach will evolve and become more thorough with experience. But here it is in its entirety, first edition.
Objective and Background
- The Rescue My IRA account is established at Scottrade, Alexandria, VA
- Account Type: IRA
- Capital Available: Initial investment was approximately $51K
The overall timeframe of this plan is from November 2011 through December 2023, when I will be aged xx. For now, let’s consider that a typical retirement age, and therefore a reasonable goal and investment horizon.
My current plan is to hold no more than 15 positions in this account, with the optimal number being around 12. After 20% of the value of the account is held in cash reserves, 80% will be invested in stock holdings, which the covered call contracts will be written against. This means that on average, a holding will represent between 5% and 5.5% of the total account value, if 15 positions are established; or between 6.5% and 7.0% if I am working with 12 positions.
Trade Entry Strategy
Trade Exit Strategy
Position Management Strategy
- If the price is stable, a new contract will be written for the same strike in a future month.
- If the price is slightly lower, a new contract at the same strike in a future month will be sold.
- If the price is significantly lower, the new contract may be based on either a lower strike price or a further out month.
- If the price is slightly higher, the new contract will be at the same or next strike price in a future month.
- If the price is significantly higher, it may be time to take profits or to continue to roll the contracts.