beginners corner

Blog

Avoiding early exercise wihen covered call writing

How To Avoid Early Exercise When Dividends Are About To Be Distributed

Covered call writing is a low-risk strategy that allows us to generate monthly cash flow by selling stock options. Since we are obligated to sell our shares to the option buyer (holder), one of the understood possibilities is that we will “lose” our shares at the strike price or the price we have agreed to [...]

2 Comments Continue Reading →
Covered call writing and the Ellman Calculator

Expanded Weekly Options: When Should We Enter A Trade?

With the rising popularity of stock option strategies and covered call writing in particular, we have seen the creation of more option products like weekly stock options. Weeklys expire each Friday of the month whereas the more traditional monthlys generally expire only on the 3rd Friday of each month. Weeklys fall into one of two categries: [...]

30 Comments Continue Reading →
covered call writing exit strategies and contract adjustments

Rolling Down And Stock Splits: A Real Life Example

Covered call writing positions can be altered by exit strategies or contract adjustments. Contract adjustments are alterations that are typically made to option contracts when the underlying stock undergoes a stock split, pays a special cash and/or stock dividend or distribution, or is involved in a merger, acquisition or corporate reorganization. Sometimes they are impacted by [...]

31 Comments Continue Reading →
Ask Alan

Ask Alan #102 – Should We Fear an Uptrending Market?

Alan answers a question shared by Tom, who asks: “With this unceasing bull market, almost everything on our premium Stock List is at a top. It seems to me that one of our choices should be stand by until things pull back a bit. Your thoughts are appreciated.” If you want more “Ask Alan” videos, [...]

7 Comments Continue Reading →
Covered call writing calculations

Calculating Future Returns Using Delta

Understanding option calculations is an integral part of the BCI methodology. Using the Ellman Calculators (Basic and Elite versions) will facilitate the process but knowing the “how” and “why” of these numbers will make us all better investors. This article was inspired by Peter, one of our members. He was concerned about the potential drop [...]

15 Comments Continue Reading →
covered calls versus covered puts

Covered Puts Versus Covered Calls

Covered call writing is the main focus of this site and the BCI methodology. Based on member demand and similarity of strategies we have been adding information on selling cash-secured puts, the topic of my upcoming 5th book. Recently I have received inquiries on related strategies that have led to some confusion specifically about covered [...]

20 Comments Continue Reading →
Ask Alan

Ask Alan #101 – Managing a Risky Trade

Alan answers a question shared by Ty, who asks: “I flat out gamble on one trade in my portfolio, and this is my gamble stock: (1) On 6/30/14 I bought GWPH at $103.90 and sold the 8/16 $105 call @ $9.00. (2) The earnings report (ER) is 8/6/14. (3) As of 7/1/14 GWPH ran up [...]

8 Comments Continue Reading →
Blue Collar Investor ETF Report

ETF Option Trading vs. Index Option Trading

Most options traders including covered call writers are familiar with exchange-traded funds (ETFs) and many trade options on these securities. Many have also heard of, but are not as familiar with, index options. The purpose of this article is to detail the differences between ETF option trading and index option trading. Definitions  Exchange-traded fund (ETF): [...]

14 Comments Continue Reading →
Ask Alan

Ask Alan #100 – Can We Day Trade Covered Call Options?

Alan answers a question shared by Marcus, who asks: “I love your tutorials on covered call writing. I’m a novice in the trading world and am very excited to try options trading. I just have a question that I hope you can answer or point to one of your videos that may contain the answer. [...]

10 Comments Continue Reading →
covered call writing and the Ellman Calculator

Writing Covered Calls On Broad Market Exchange-Traded Funds

The initial main step for covered call writers is to select the best underlying security. This choice will vary from investor to investor based on goals and risk tolerance. Some of our members prefer exchange-traded funds (ETFs), a strategy I use in my mother’s portfolio. ETFs offer the advantages of instant diversification, less volatility (in [...]

17 Comments Continue Reading →