12/31/12 - 951,950 (S & P 1,426) Balance at beginning of 2013
01/02 - 1,000,725 (S & P 1,462) - 2013 valuation low to date
01/29 - 1,067,885 (S & P 1,508)
02/08 - 1,050,545 (S & P 1,518)
02/19 - 1,072,805 (S & P 1,531)
02/25 - 1,050,295 (S & P 1,488)
04/02 - 1,114,865 (S & P 1,570) - Final PFE cash-out for 796K with stock at $29.21
04/05 - 1,082,205 (S & P 1,553)
04/12 - 1,131,750 (S & P 1,589)
04/18 - 1,096,390 (S & P 1,542)
05/03 - 1,123,150 (S & P 1,614)
05/09 - 1,199,405 (S & P 1,627) - 2013 valuation high to date
05/10 - 1,197,445 (S & P 1,634)
Up 25.9%. 2013 Combined portfolio gains to date
Up 14.6%. S & P 500 (1,426 to 1,634)
Note: The above stats are inclusive of the $94,240 that I earned on the Pfizer portfolio this year through the April. 2 final cash-out. Pfizer profits from 11/17/04 through 04/02/13 final cash-out amounted to $500,085 on an investment that averaged about 300K over the time period of 8.3 years.
Here is a re-post of the Dec. 31, 2012 transaction where I sold 4 of the AAPL 350-strike naked puts for $1,302 apiece at a time when the stock was at $532.32:
12/31/2012 15:08:02 Sold 4 AAPL Jan 18 2014 350.0 Put @ 13.02 5,198.61
These puts are currently trading for $635 bid, $665 asked and could now be bought back for the ask price of $665 with no problems. The puts have been virtually cut in half from where they were selling at on Dec. 31 because over four months in time have elapsed and the stock has held repeatedly in the $390 tio $400 area; it would likely take virtually a market crash now to see AAPL below $350 a share.
Why did the options trade at over 41,300 apiece four months ago when the stock was still so far above $350? The reason, believe it or not, is that BULLISH AAPL investors acting in their own interests were buying these options like crazy and their very buying is what jacked up prices far above what logic dictates they should have been selling at.
Who were all of these bullish AAPL buyers of the ostensibly semi-worthless 350-strike naked puts? They were the 98% of put sellers who do NOT have the authority to sell NAKED puts; the best they can do is to sell fully cash-covered puts. The problem with the fully cash-covered puts is that margin requirements at all brokerages INCLUDING Ameritrace are extremely onerous. Minimum margin requirements on fully cash-covered puts aren't set by the brokerages but by the SEC and the options exchanges. And these entitities both agree that for purposes of selling fully cash-covered puts, the assumption must be made that the underlying stocks will go all the way down to ZERO. That assumption has to be made even in the case of "safe" utilities or stocks like IBM.
When AAPL was at $532, there were lots of folks willing to sell relatively-safe puts like the 420-strikes.
There's a major reason why I can continue having the returns that I do in non-crashing markets. The fact is that in the fullness of time encompassing asy a two-year period, there are almost no underlying stocks that I lose money on. Does this mean that I'm some kind of extraordinarily good stock picker and market timer? Not at all - I have my share of stocks that are down from inception - including right now the likes of AAPL, PBR, JCP and BIDU (my Jan. 4 naked put position on that one). But in every one of these situations where the stock is down, I'm currently UP by double-digit percentages. That's because my investments aren't in the stocks themselvves but in deep-out-of-the-money naked puts.
Take AAPL for example. On the last day of 2012 when the stock was at $532.32, I sold 4 of the 350-strike naked puts out to Jan. 2014 for $1,302 apiece. After commissions, I received up-front $5,200 in net proceeds and cash margin requirements at TD Ameritrade (far and away they have the lowest margin requirements in the land on naked puts) amounted to $19,220.
AAPL is no longer a $532 number; it's still only $452.97 even after its recent furious rally. That leaves buy-and-hold investors down 15% from the price where I got involved. However, I didn't buy the stock - I sold the 350-strike naked puts for $1,302 each. And the fact is that those puts can now be bought back for only $665 apiece which at this point leaves me with PROFITS of $637 apiece or about $2,500 all told after commissions. And $2,500 in profits on a $19,200 investment is a nominal 13% return on investment for four months. So on one of the very worst underlying stocks that I'm involved in, I am UP by 13% while buy-and-hold investors are DOWN by 15%.
Now if an investor can earn such returns on even his worst-performing stocks, imagine how well the overall portfolio figures to do.