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Option selling/ open interest and Volume

Option Liquidity: When Is Vol(ume) Greater Than Open Interest?

Check the options chain before selling a covered call or cash-secured put. In addition to determining the premiums and returns we will generate we also need to make sure the interest or liquidity in these options will be adequate enough for favorable trade executions. Below is a typical options chain showing both Vol(ume) and open interest (OI): [...]

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Why do Call Buyers Exercise Early Prior to the Ex-Dividend Date?

Covered call writers know that early exercise is extremely rare. Call buyers are generally better off selling the option rather than exercising early. In this article we will evaluate why a call buyer may choose to exercise an in-the-money call option prior to expiration by evaluating the choices available to these option holders.   Value of [...]

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Ask Alan

Ask Alan #110 – Should I Buy Back My Option Months Prior To Expiration?

Alan answers a question posed by Shelley, who asks: “On January 6th I sold a July $52.50 call option for $2.90 on WFC, a stock already in my account. Now the premium is $3.60 as share price moved up to $54.38. I do not want to sell my stock. When should I buy back the [...]

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covered call writing and dividend capture

Covered Call Writing And Dividend Capture: Evaluating A Proposed Strategy

Capturing dividends using covered call writing has been a topic on great interest lately. I recently wrote an extensive white paper on this topic located in the “resources/downloads” section of your premium site. In this article I will evaluate an interesting approach to a strategy recently sent to me by one of our members who [...]

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Delta rises as strikes go deeper in-the-money

Delta And The Moneyness of Options

Understanding and mastering the Greeks are key factors in becoming an elite covered call writer and put-seller. In this article, I will focus on delta, one of the important Greeks, as it relates to the moneyness of options (in-the-money, at-the-money or out-of-the-money). Let’s start with a review of a few definitions: Definitions Greeks: They are numbers [...]

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option-selling decisions based on implied volatility

Implied Volatility of ETFs and our Covered Call Writing and Put-Selling Decisions

Covered call writers or cash-secured put sellers who use ETFs (as opposed to individual stocks) tend to be novice put writers, more conservative investors, or have limited funds or time. If you fall into any of these categories, knowing your risk level is critical to your investment decisions and specifically, to which underlying securities you [...]

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What Are Wash Sales And Wash Trading? Are They The Same?

Covered call writing and put-selling involve the buying and selling of stocks and options. When executed in non-sheltered accounts, taxable events are created. Since the BCI community is populated with savvy investors, the topic of wash sales has come up frequently and some have used the term wash trading interchangeably with wash sales. This article will discuss [...]

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fundamental screens for covered call writing and put-selling

Using Fundamental Analysis To Screen For Option-Selling Stocks

Fundamental analysis, technical analysis and common sense principles make up the 3-pronged screening system used in the BCI methodology for locating option selling stocks. We start with the IBD 50 and move to the other screens from there but I always encourage the use of additionalther resources to locate elite candidates to serve as the [...]

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put-selling calculations

Selling Cash-Secured Puts Instead Of Placing Limit Orders

Selling cash-secured puts is a strategy with goals of creating monthly cash flow while retaining capital preservation as a priority. However, many of our astute members are also using this strategy to purchase a stock “at a discount” instead of setting up limit order instructions to the broker. Before highlighting the strategy, let’s review the [...]

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covered call writing calculation

Evaluating Returns When Rolling Out And Up

Covered call writing and put-selling calculations must be accurate and preferably understood by option-sellers. I created the Ellman Calculators to facilitate the authentic computations we depend on. In this article, I will review a successful trade executed by one of our members, David L, who used UTHR from our Premium Running list as the underlying [...]

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