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covered call writing calculations

Using Put-Selling To Enter A Covered Call Trade At A Discount

Combining covered call writing and selling cash-secured puts into a multi-tiered option strategy is one way to hedge against bear and volatile market environments. In my book, Selling Cash-Secured Puts, I refer to this as the PCP or put-call-put-strategy. First I will give a general overview of the strategy and then an example using specific [...]

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Ask Alan

Ask Alan #106 – Using Put Options To Buy Stocks At A “Discount”

Alan answers a question shared by Richard, who asks: “In your recent seminar in Philadelphia you briefly mentioned that you could buy a stock at a discounted price using puts. Can you give an example how to do this with one of the stocks on your premium stock list? Thanks very much.” If you want [...]

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covered call writing and put-selling inj bear markets

Comparing Covered Call Writing And Put Selling In Bear Markets

Our stock options strategies, whether writing covered calls or selling cash-secured puts (the topic on my just published book) requires us to make an overall market assessment before entering any trades. In last week’s article we evaluated bull market scenarios. In this week’s blog we will examine bear market environments. When selling covered calls we would favor in-the-money [...]

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Comparing covered call writing and selling cash-secured puts

Comparing Covered Call Writing And Put Selling In Bull Markets

Covered call writing or put-selling? In-the-money or out-of-the-money strikes? When we view an options chain there are some basic principles we must factor into our final covered call writing or put-selling decisions. First, which of these two strategies is most appropriate? Unfortunately, there is no one answer that is right for every investor. I prefer [...]

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interest rates and option premiums for covered call writing and put-selling

RHO: Why Interest Rates Effect Our Option Premiums

Interest rates and the option Greeks play an important role in understanding option trading basics. Rho, not considered a major Greek, measures the change in an option’s price resulting from a 1% change in interest rates. When interest rates do change, it is normally by 25 basis points, not a full percentage point and that’s [...]

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implied volatility and option pricing

Implied Volatility: General Market Conditions That Make Option Values Move Up Or Down

Option trading basics teaches us that selling call and put options is actually selling time value. Time value consists mainly of time to expiration stats and the implied volatility (IV) of the underlying security. Since most of us are selling monthly options, the main distinguishing factor in our option prices is the implied volatility…we are [...]

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commissions for covered call writing and put-selling

Evaluating Brokerages And Comparing Their Commissions

Options trade executions include a discussion of the levels of trading approval needed to use various options strategies. You will recall that these defined levels will vary slightly from one brokerage to another. Here is a chart reviewing a sample of these trading levels: In this article, I will review the commission structure of some [...]

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Covered call writing in bear and volatile markets

Emergency Management Report: Dealing with Volatile and Bearish Markets

With the stock market declining over 5% in the past month as a result of geo-political and global concerns exacerbated by the fears of an Ebola epidemic we find ourselves in a position that may lead to “panic” in our investment decisions. The stock market seemed to stabilize a bit on Friday but we are [...]

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how options trades are executed

Options Clearing Corporation: Guaranteeing Our Options Trades

Covered call writing and selling cash-secured puts involves investing our hard-earned money. Did you ever wonder who guarantees these trades? It’s not our broker or even our broker’s clearing firm. It’s the Options Clearing Corporation or the OCC. This is an organization that acts as both the issuer and guarantor for option and futures contracts. [...]

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Ask Alan

Ask Alan #104 – When Should I Close My Position Early If Stock Price Moves Up?

Alan answers a question shared by John, who asks: “I had the opportunity to utilize your premium report for the first time last Monday (8/18). I purchased 100 shares of CAVM and sold one option on that stock. On Friday, I bought back the option and sold the stock. It looks like it was a [...]

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