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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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Alan Ellman/covered call writing seminar

Capital Gains (Losses) For Selling Cash-Secured Puts In Non-Sheltered Accounts

In a recent article, tax implications for covered call writing was discussed. In this publication I will highlight the tax ramifications as they apply to selling put options. What is a Capital Gain?  A capital gain is an increase in the value of as capital asset, such as a stock or an option that gives [...]

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covered call writing and capital gains

Capital Gains (Losses) For Covered Call Writing In Non-Sheltered Accounts

Whether we sell covered calls or cash-secured puts strong consideration should be given to trading in sheltered accounts whenever possible. Most, if not all, of our trades will be short-term in nature (less than one year) and therefore will be taxed at the ordinary income tax rate (up to 35%) which is much higher than [...]

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Ask Alan

Ask Alan #108 – Will My Shares Be Called Away After Expiration Friday?

Alan answers a question posed by Joe, who asks: “The disposition of shares is not accounted for in my paper-trading account. What happens to my shares at the end of the contract in each of these scenarios…” If you want more “Ask Alan” videos, you can view the archive. More Video: For those new to [...]

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stocks with monthly reports making them too risky for covered call writing and put-selling

Airline Stocks Now “Banned” From Covered Call Writing And Put-Selling Strategies

Stocks eligible for our covered call writing and put-selling portfolios are screened in a 3-pronged approach: fundamental analysis, technical analysis and “common sense principles” like avoiding earnings reports. One of the categories under the common sense umbrella is “banned stocks” due to monthly same store retail sales. This list, once 80-long, is now down to [...]

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The Greeks and covered call writing

How To Use Implied Volatility In Our Covered Call Writing Decisions

Understanding the Greeks, or factors that impact the value of our covered call premiums, is essential to mastering options trading basics and becoming an elite covered call writer. One of the Greeks (although not truly a Greek letter) is Vega, the amount an option price will change for every 1% change in volatility. As the [...]

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using beta when selling cash-secured puts and covered call writing

Using Beta To Capture Higher Premium Returns

When using covered call writing and put-selling strategies it is important to set goals for initial returns in order to select the most appropriate underlying security and option. My goal for initial returns is 2% – 4% per month and a bit higher in a bull market environment. Recently, several of our members have contacted [...]

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covered call writing and put selling decisions using economic reports

Economic Reports And Our Covered Call Writing Decisions

Covered call writing and put-selling results are enhanced by selecting the best underlying securities and most appropriate options. Stock selection involves screening via fundamental and technical analysis as well as common sense screens (like avoiding earnings reports). Option selection is based on several factors including chart analysis, overall market assessment and personal risk tolerance. In [...]

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covered call writing seminar

How Much Did That Stock Cost Us?/ How Much Did We Receive When We Sold It?/When Options Are Exercised

Covered call writing and put-selling generates monthly cash flow because we are selling option contracts and getting paid for undertaking the contract obligations. When a contract is exercised, we then enter another phase where we either buy or sell shares. The purpose of this article is to review and (hopefully) simplify the mathematics of exercise [...]

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implied volatility and option selling

Implied Volatility: More Important Than Historical Violatility To Covered Call Writers And Put-Sellers

Understanding the concept of implied volatility is essential for successful covered call writing and selling puts. First, implied volatility gives us a window into the “market’s” perception of future price movement. It will also allow us to calculate probability of a stock price reaching a certain level. Like all other parameters, implied volatility, although quite [...]

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