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Ask Alan

Ask Alan #132 – “How do I calculate the best time to close?”

Alan answers a question posed by Tom, who asks: I am confused about an exit strategy situation. On October 24th, I bought IPHI for $38.00 and sold the January, 2017 $40.00 call for $2.11. Today, (11/19/2016) the stock is trading at $46.39 and the bid-ask spread for the call is $7.30 – $8.50. How do […]

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calculating covered call returns

Establishing a Blue Chip Covered Call Portfolio

Covered call writing and selling cash-secured puts are strategies that can be crafted to meet the personal risk tolerance of all investors. I use stocks selected from our premium watch lists in my accounts and from the ETF Reports in my mother’s account. Recently, several members have asked about using only blue chip companies. These […]

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covered call writing short-term risk

Short-Term Trades with High Returns: Evaluating a Real-Life Example

Covered call writing is a conservative strategy for cautious investors. We want the higher than risk-free returns with the least amount of risk. One question that does come up in this regard is why not enter a short-term trade that offers impressive returns? To get an understanding if this is a beneficial approach there is […]

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put-selling calculations

Selling In-The-Money Puts to Generate Higher Premiums: Evaluating a Real-Life Trade

Selling Cash-Secured Puts can be used to accomplish several goals; Generate cash flow Buy a stock at a discount Used as part of a multi-tiered option selling strategy along with covered call writing (PCP strategy) Our strategy goal along with overall market assessment, chart technicals and personal risk tolerance will ultimately guide us to the […]

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covered call writing and earnings reports

Avoiding Earnings Reports: Two Common Sense Perspectives

Never sell a covered call option or a cash-secured put for a stock with an upcoming earnings report. This is one of the most important rules in the BCI methodology. As a matter of fact, most other principles I refer to as guidelines because there is some leeway or flexibility to them. For example, the […]

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Exit Strategy Selectivity: Can We Implement Too Many Exit Strategies?

Covered call writers, historically, have ignored exit strategies as part of their investment approach. Certainly, not in the BCI community but most everywhere else. As we become aware of the major financial benefits of mastering the position management skill, we must be mindful of the possibility of over-management. Eating a slice of pizza is enjoyable, eating a […]

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calculating covered call writing returns

20%/10% Guidelines: Calculating Cost Basis and Option Premium After Rolling Out And Up

Exit strategies or position management for covered call writing and selling cash-secured puts is one of the three required skills we must master to achieve the highest levels of success. One of the most important strategies we employ is the 20%10% guidelines which guide as when to buy back a covered call option: When option value […]

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technical analysis for covered call writing

Technical Analysis Indicators for Long and Short-Term Portfolios

Technical analysis represents one third of the stock screening process in the BCI methodology. The other two are common sense principles (referred to as “descriptive terms for long-term investing) and fundamental analysis. Reading price charts is as much an art as it is a science and there is no one right way to technically analyze […]

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Over-Trading Our Option Positions: Good for Brokers, Not Good For Us

Exit strategies for covered call writing are essential for achieving the highest levels of success. In the BCI methodology, we have a series of guidelines that assist us in determining which position management techniques should be instituted and when we should consider them. Not taking appropriate action when responses to changes in our stock and option positions […]

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