Monthly Adjustments To Synthetic DGI Portfolio

Today I adjusted the portfolio by rolling all December 2013 short calls out to March 2014. The premiums received for the trades are consistent with 4% annual income on the $250,000 hypothetical portfolio.

The profits received from the closed positions would be 7.6% annual income for the hypothetical $250,000, when extrapolated and annualized.

I also rolled LEAPS for Texas Instruments (TXN) and Johnson & Johnson (JNJ) up by 5 and 10, respectively. This reduces the amount at risk, as well as the potential profit. However, it creates positions that are easier to defend in the event of a market pullback. Both stocks were up almost 10% since I opened the positions, and the roll was according to pre-planned strategy.

The covered calls on TXN and JNJ are in the money, so I have no further exposure to upside on these stocks. Delta for the positions is less than 0.50. I considered either closing the positions, and/or adding another position in a different stock in order to regain the lost exposure. However, there is no urgency and I decided to wait for a while and see what happens.

The next set of rolls will be made after options expiration in August, when April expirations will become available. The plan is, to roll January short positions out another three months.

I would like to add some exposure to Raytheon (RTN), which comes up on the screen that forms the baisis of the strategy. But I'm hopeful that the market will back up a little bit so I can get a better entry point.