Below is a snapshot of the AKS current position on May 22nd 2012 at 4pm. Close price is $6.09.

REALISED GAIN/LOSS *
Closed position : Long 17 AKS Sept 2012 Puts strike $9 : bought $1.79, sold $2.46 = $1136 (gain)
(* including commissions)

UNREALISED GAIN/LOSS*
Open position : Long AKS 1700 shares : price is 6.09 = -$3383 (loss)
Open position : Long 17 AKS Sept 2012 Puts strike $8 : price is $2.17 = +$745 (gain)
Open position : Short 3 AKS June 2012 Puts strike $6 : price is $0.32 = $12 (gain)
(* including commissions and assuming worst case option prices)

Total gain / loss : -$1502 or 10.9% (not good)

For comparision “Buy and hold” is would be down 24.6%, with no cash on hand.

This means the strategy is currently down 10.9% (not good – but significantly better than buy and hold), however we do have cash so we now have $1136 cash and $745 profit in the put option (enough to buy 300 shares using the market’s money at a share price of 6.09 – about $1800). The theory is that if we run this for long enough we acquire enough shares at lower prices (we will lower our average price), but crucially we are not adding any more of our own money. We are currently procrastinating about whether we should do this now, or wait for lower prices (and for the possible June put assignment).

The delta on the protective put is 75% (so at the current stock price, for every $1 move we are hedged for 75cents of it – effectively a long exposure of only 25% of the traditional “buy and hold” stock position).