HOME WORK (COOLTOOL)

charles brunell on

Paul

I'm a little confused (NORMAL). I was using the CoolTool to see if I should buy back the calls I sold yesterday on the SPY. If you remember I sold 3 weekly calls with a 146 strike and a .46 premium which gave a 26% APR. I checked this evening about buying it back with a .13 ask. That gave me a 58% APR. How can that be higher than my original APR?

CHUCK B

Paul Madison on

Good question Chuck,

When you sold yesterday it was going to take you 4 days to make .47 or maybe .42 after commissions, which is roughly $.105 /day. But by buying back today you got the net of .47 less .13 or .34 which is probably something like .24 after commissions) in just one day. 24 cents in one day is 2.3 times better than 10.5 cents in a day and thus the APR should be something north of two times greater and it is. My math is just all rough but you get the idea. The math in the Tool is precise.

Hope this helps.

Paul

On Sep 25, 2012, at 4:35 PM, charles brunell wrote:

Paul
I'm a little confused (NORMAL). I was using the CoolTool to see if I should buy back the calls I sold yesterday on the SPY. If you remember I sold 3 weekly calls with a 146 strike and a .46 premium which gave a 26% APR. I checked this evening about buying it back with a .13 ask. That gave me a 58% APR. How can that be higher than my original APR?

CHUCK B

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