With the year 2012 now behind us, the DITM ( deep-in-the-money covered call options) strategy written about in previous columns is nearing its 4th year. 2012 was not the best year for DITM, at just over 6% annualized, but it did beat the DJIA 30 ( but not the S&P 500, which was because of AAPL's 26% rise - it is 8% of the SPX). Still, it beat the average hedge fund at 1%, and only 25% of mutual funds beat their benchmark.
2012 saw four losses of the 21 closed trades - the most yet; mainly it was my bad, putting too much into the energy and material stocks, such as ERF, CLF, VALE, PGH, etc. For the record, the reader can see all trades in the DITM blog:
http://ditmcalls.blogspot.com, - the 2011 trades are in the previous blog, and Older Posts contain the entire history from May '09.
Since the blog is not that MWord text-friendly, some explanation of the latest blog is needed: the first list is the 17 winner of 2012, the total % divided by 17 for the average. Then the four losers (total 92.76%) averaging 23.19% - not including the loss on the sold Puts on CLF. Based on annualized percentages, the net profit was 6.19%, well below the average of 9 to 10% historically. This was derived by subtracting the total Loss% (92) from the gain % (223) , or 130%, and dividing by total trades (21).Average hold was 4.5 months. Losses obviously are not annualized.
This is, of course a snapshot - the better trades are still ongoing - the losses taken when needed. Any questions from the reader, my email is at brentleonard.com.