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maximizing covered call returns using theta

Should I Enter My Trades On Expiration Friday Or The Following Monday?

The timing of our option trade executions will impact the success of our covered call writing returns. The BCI methodology prides itself on having rules and guidelines for buying back options, re-selling options and selling long stock positions. One question that many of us have thought about is when to enter our 1-month trades. My [...]

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covered call writing exchange-traded funds

Why Covered Call ETFs Under-Perform

With the popularity of covered call writing and selling cash-secured puts growing in popularity, we have witnessed the creation of new exchange-traded funds based on these strategies. Over the last few years I have not been a proponent of these securities mainly because they under-perform the overall market and motivated retail investors can do so [...]

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options on an index and on an exchange-traded fund

Index Options And Exchange-Traded Funds Options: A Comparison

Writers of covered calls and cash-secured puts use stocks or exchange-traded funds as the underlying securities. It is the value of these securities that give value to our option premiums. For example, we will buy back an option when share price moves down causing the corresponding option to decline in value as well. We may [...]

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Ask Alan

Ask Alan #103 – Combining Covered Call Writing and Dividend Capture

Alan answers a question shared by Clyde, who asks: “I’ve been on the look-out for an Investor’s Business Daily/Options play and your service maps exactly to that. Have you considered another dimension to this, as in, dividend plays?” If you want more “Ask Alan” videos, you can view the archive. More Video: For those new [...]

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maximizing covered call returns using theta

How To Maximize Covered Call Writing Returns By Understanding Time Value and Theta

Mastering the concepts of the time value of our option premiums and how theta impacts our option profits will help elevate our returns to the highest possible levels. Let’s first define these terms: Definitions Time value: The portion of the option premium that is attributable to the amount of time remaining until expiration. It is [...]

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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 [...]

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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: [...]

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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 [...]

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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, [...]

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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 [...]

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