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covered call writing and short selling concerns

Short Selling and Covered Call Writing

Screening stocks and exchange-traded funds for covered call writing and put-selling involves evaluating for fundamentals, chart technicals and common sense parameters. One of the issues that can impact a position we hold from time to time is short selling.   Definition Short selling is when we sell a stock we don’t yet own. It is borrowed [...]

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Negotiating better option prices for covered call writing and selling cash-secured puts

How To Negotiate Better Option Prices Using The “Show Or Fill Rule” / $30 Rebate Expiring

Covered call writers generate cash flow by selling call options associated with a stock or exchange-traded fund. Our goals are to generate the highest possible returns with low-risk trades and that fit our requirement for capital preservation. The three required skills for achieving these goals are stock (or ETF) selection, option selection and position management [...]

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exchange traded funds for covered call writing and selling cash-secured puts

ASHR: Exchange-Traded Fund in the Spotlight

Exchange-traded funds (ETFs) offer covered call writers and put-sellers the advantage of instant diversification and generally have a lower implied volatility associated with them compared to individual stocks. Whether we are dealing with stocks or ETFs each security must be evaluated on its own merit before using it as the underlying security. In this article, [...]

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put-call parity and ex-dividend dates

Why Are Call Premiums Larger Than Put premiums For Near-The-Money Strikes?

When studying covered call and put-selling option prices we learn that the market will correct any potential arbitrage opportunities. Arbitrage is the simultaneous purchase and sale of an option in order to profit from a difference in the price. It exploits price differences of similar financial instruments. This would not be fair and rarely exists [...]

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using cash-secured puts to buy a stock at a discount

How To Use Puts To Buy A Stock That Has Gapped Up

Mastering both conservative option selling strategies, covered call writing and put-selling will allow us to maneuver our way through most market situations. This past Wednesday, May 27, 2015 several of the stocks on our BCI Premium Watch List gapped up. On last week’s blog commentary I addressed the situation with BRCM and AVGO and the [...]

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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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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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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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