The document describes a rolling collar options strategy presented by Haryo Suparmun to the Happy Day Options Club. The strategy involves buying an underlying asset like QQQQ stock, selling near-month calls against the position, and purchasing long-term protective puts. As the short calls expire or are closed, new calls are sold each month to generate premium income and maintain downside protection from the long puts, hence creating a "rolling" collar. Backtesting showed the strategy performed better than a buy-and-hold approach for QQQQ over a 59-month period by mitigating losses in down markets while still achieving gains.

1. HAPPY DAY OPTIONS CLUB
ROLLING COLLAR STRATEGY
Presented by
HARYO SUPARMUN

2. OPTIONS
AN OPTION CONTRACT:
- A CONTRACT BETWEEN WRITER AND
HOLDER.
- GIVES TO ITS HOLDER THE RIGHT, BUT
NOT THE OBLIGATION, TO BUY OR
SELL SHARES OF THE UNDERLYING
SECURITY AT A SPECIFIC PRICE ON OR
BEFORE A GIVEN DATE.
- AFTER THIS DATE, THE OPTION
EXPIRES.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
2

3. CALL OPTIONS
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
3

4. PUT OPTIONS
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
4

5. RIGHT OR OBLIGATION
CALL OPTIONS
Buy Call
Right, not
obligation to BUY
PUT OPTIONS
Buy Put
Right, not
obligation to SELL
Sell Call
Obligation to SELL,
if being exercised
Sell Put
Obligation to BUY,
if being exercised
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
5

6. COLLAR STRATEGY
OWN or BUY SHARES OF STOCK.
SELL CALL OPTIONS AGAINST THE
STOCK.
BUY PUT OPTIONS FOR PROTECTION.
A combination of
Covered Call and Protective Put
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
6

7. COLLAR STRATEGY
XYZ trading at $72,
Selling an 80-strike Call for $2
Buy a 70-strike Put for $3
Creates a collar
limits the total risk to $3 per share
limits profit potential to $7 per share.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
7

8. COLLAR:
Long Stock at $72, Long 70 Put at $3, Short 80 Call at $2
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
8

9. ILLUSTRATION ON ROLLING COLLAR TRADE
MARKET:
NASDAQ 100 TRACKING STOCK (QQQQ) AND ITS
OPTIONS. STRATEGY CAN BE APPLIED TO OTHER
HIGH-VOLUME EXCHANGE TRADED FUNDS (ETFs)
AND THEIR LIQUID OPTIONS CONTRACTS.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
9

10. ILLUSTRATION ON ROLLING COLLAR TRADE
SYSTEM CONCEPT:
NASDAQ 100 TRACKING STOCK (QQQQ)
BUY-&-HOLD STRATEGY
vs
COLLAR using LEAPS
LEAPS= Long-term Equity AnticiPation
Securities (options with at least a year to
expiration)
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
10

11. ILLUSTRATION ON ROLLING COLLAR TRADE
Strategy:
-
Buy or Own underlying market (QQQQ).
Sell near month Call Option.
Buy LEAPs Put for protection.
Position:
- Covered Call to collect income.
- Long Put for Protection.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
11

12. ILLUSTRATION ON ROLLING COLLAR TRADE
Combining a protective Put with
Covered Call (Long QQQQ and Short
OTM Call) creates a “rolling” collar.
The “roll” occurs as you buy back the
short call each month (or,
alternately, they expire) and then
sell new calls in the next expiration
month.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
12

13. ILLUSTRATION ON ROLLING COLLAR TRADE
Initial investment $50,000 on Jan 2, 2001,
no additional capital over the past 5 years.
Adjusted overall position periodically as
QQQQ moved Up or Down. Additional
shares were purchased with the premium
from selling short-term calls. Shares were
sold if funds were needed to buy back ITM
calls or roll the LEAPs.
No margin were used, commissions were
not included, and all trades used current
bid/ask prices.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
13

14. ILLUSTRATION ON ROLLING COLLAR TRADE
QQQQ closed at $53.44 on Jan 2, 2001.
Create initial collar:
-
Buy 735 shares QQQQ.
Buy 7 Jan 2003 $55 Puts (the LEAPs).
Sell 7 Feb 2001 $58 Calls.
Compared with:
Buy-&-hold strategy bought 935 shares.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
14

15. ILLUSTRATION ON ROLLING COLLAR TRADE
Trade Rules:
1. For every 100 shares owned,
purchase an ATM LEAPS Put option in
farthest out year. Hold these Puts
until a new LEAPS expiration become
available for the following year.
Then, sell the current long Puts and
buy the same number of ATM Puts in
the new furthest expiration year.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
15

16. ILLUSTRATION ON ROLLING COLLAR TRADE
Trade Rules:
2. For every 100 shares owned, sell
near-month Calls just less than one
standard deviation above QQQQ’s
current price. If call’s bid price is less
than $0.10, select one strike lower to
ensure you collect adequate
premium.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
16

17. ILLUSTRATION ON ROLLING COLLAR TRADE
Trade Rules:
3. On expiration day, if the short calls are ITM, then cover
them (most likely at a loss). If the calls are OTM, then
allow them to expire worthless.
In either case, sell the next-month calls at this time.
a. If the calls are ITM, any cash shortfall is met by selling
QQQQ shares.
b. If the calls are OTM, any excess cash is used to purchase
additional QQQQ shares.
c. After another 100 shares are purchased, sell an additional
call each month and begin to save that premium to buy
another ATM Put to protect those shares.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
17

18. ILLUSTRATION ON ROLLING COLLAR TRADE
Test Data:
The system was tested using NASDAQ 100 tracking
Stock (QQQQ) and its options.
Test Period:
Jan 2, 2001 to November 18, 2005
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
18

19. ILLUSTRATION ON ROLLING COLLAR TRADE
Test Result:
-
-
QQQQ was equally split between positive and
negative monthly returns during test period, with 29
positive months and 29 negative months.
After 59 months:
- Buy-&-hold approach declined from $50,000 to
$38,752, or 22.50% loss.
- Rolling collar climbed from $50,000 to $59,388 (not
including commissions), or 18.78% gain.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
19

20. ILLUSTRATION ON ROLLING COLLAR TRADE
Outcome:
The rolling collar is a hedged position,
- dramatically mitigates losses in bear markets.
- although it lags buy-&-hold in sharply bullish
markets, it still can gain ground when the market
rallies.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
20

21. Figure 1: Daily Chart of QQQQ
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
21

22. Figure 2:
Compares the performance buy-&-hold vs rolling collar
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
22

23. Strategy Summary on QQQQ
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
23

24. NASDAQ 100 Trust Shares (QQQQ)
$38.65 Up 1.02 (2.71%) Thursday, June 15, 2006.
JUL 2006, Expire Jul 21, 2006
Calls
Symbol
Puts
Last
Bid
Ask
Volume
Open Int
Strike
Price
Symbol
Last
Bid
Ask
Volume
Open Int
QQQGI.X
4.00
3.90
4.10
1,207
5,555
35.00
QQQSI.X
0.15
0.10
0.20
1,871
70,400
QQQGJ.X
3.00
3.00
3.20
6,102
5,730
36.00
QQQSJ.X
0.25
0.20
0.25
16,727
189,392
QQQGK.X
2.20
2.20
2.25
17,630
26,359
37.00
QQQSK.X
0.35
0.35
0.40
92,558
212,955
QQQGL.X
1.40
1.40
1.45
61,062
64,464
38.00
QQQSL.X
0.60
0.55
0.60
28,303
215,421
QQQGM.X
0.80
0.75
0.80
30,814
135,732
39.00
QQQSM.X
0.90
0.90
0.95
22,060
137,896
QQQGN.X
0.35
0.30
0.35
8,018
122,443
40.00
QQQSN.X
1.55
1.50
1.55
11,495
76,366
QQQGO.X
0.15
0.10
0.15
2,526
58,836
41.00
QQQSO.X
2.40
2.30
2.40
2,498
18,090
QQQGP.X
0.05
N/A
0.05
58
47,191
42.00
QQQSP.X
3.30
3.20
3.40
297
9,870
QQQGQ.X
0.05
N/A
0.05
50
13,571
43.00
QQQSQ.X
4.50
4.20
4.40
8
2,354
QQQGR.X
0.05
N/A
0.05
6
4,503
44.00
QQQSR.X
6.10
5.20
5.40
208
675
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
24

25. NASDAQ 100 Trust Shares (QQQQ)
$38.65 Up 1.02 (2.71%) Thursday, June 15, 2006.
JAN 2008
Calls
Puts
Volume
Open Int
Strike
Price
8.00
1
5,096
35.00
WDMI.X
1.85
1.80
7.10
7.40
3
3,481
36.00
WDMJ.X
2.20
6.20
6.50
6.70
5
3,079
37.00
WDMK.X
WDAL.X
5.90
5.80
6.10
7,549
12,487
38.00
WDAM.X
5.30
5.20
5.50
91
33,008
WDAN.X
4.80
4.70
4.80
193
WDAO.X
4.08
4.10
4.40
YWZAP.X
3.60
3.60
YWZAQ.X
3.20
YWZAR.X
2.30
Symbol
Last
Bid
Ask
WDAI.X
7.40
7.80
WDAJ.X
6.30
WDAK.X
Jun 17, 2006
Symbol
Last
Bid
Ask
Volume
Open Int
1.95
222
6,230
2.05
2.20
59
6,567
2.75
2.35
2.50
109
6,698
WDML.X
2.80
2.70
2.85
7,604
22,200
39.00
WDMM.X
3.00
3.00
3.30
83
38,211
34,081
40.00
WDMN.X
3.80
3.50
3.70
2,038
30,134
17
49,878
41.00
WDMO.X
4.20
3.90
4.20
87
64,275
3.80
47
34,779
42.00
YWZMP.X
4.60
4.50
4.70
100
28,426
3.20
3.40
15
17,085
43.00
YWZMQ.X
5.00
5.00
5.30
354
15,683
2.75
2.90
25
7,368
44.00
YWZMR.X
6.20
5.70
6.00
3
11,641
HARYO SUPARMUN
in HDO Club Meeting
25

26. Rolling Collar STRATEGY on QQQQ
Buy 100 QQQQ at $38.65,
Sell 39-strike JUL 06 Call for $0.75,
Buy 36-strike JAN 08 Put for $2.20.
Costs: 38.65+2.20-0.75=$40.10
If price >$39, close Call option,
if price <$38, allow expire,
follow by sell next month Call at this time.
ROI ~ 2% per month.
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
26

27. THANK YOU!!!!!!
THANK YOU!!!!!!
HAPPY DAY
HAPPY DAY
&
&
HAPPY TRADING
HAPPY TRADING
Jun 17, 2006
HARYO SUPARMUN
in HDO Club Meeting
27