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BCI put calculator

Buying Back Put Options When Share Price Gaps Up: A Real-Life Example with AVGO

When selling cash-secured puts our position management skills include buying back the short puts under certain circumstances. These include situations when share price moves up or down dramatically. When share price declines below the breakeven, we start losing money. Our guideline is to buy back the sold put if share price declines by more than […]

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selling cash-secured puts calculations

Selecting the Best Put Strike Based on Overall Market Assessment

Selling cash-secured puts requires us to master the three required skills: stock (or ETF) selection, option selection and position management. This article will highlight how to select a put strike based on our overall market assessment.   Market assessment data published in BCI newsletters Investor Business Daily’s market assessment Dr. Eric Wish’s GMI Index BCI […]

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risk management for options

Naked Options versus Covered Options: Where Should We Take a Stand?

Covered call writing and selling cash-secured puts are more conservative strategies than trading naked options (selling calls and puts without having the resources to execute the potential trade obligations, if exercised). A naked call occurs when a speculator writes (sells) a call option on a security without ownership of that security. It is one of […]

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Why the 3% Guideline Applies to Puts but Not to Call Options

Selling options (covered call writing and selling cash-secured puts) will result in a positive outcome in the first four of the following five scenarios: Stock price moves up significantly Stock price moves up slightly Stock price remains the same Stock price moves down slightly (less than option premium) Stock price moves down substantially Although it […]

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covered call writing and technical analysis

Setting Up a Covered Call Trade by First Selling an Out-Of-The-Money Put

A covered call trade can be initiated by first purchasing the underlying stock or exchange-traded fund (ETF). It can also be launched by first selling an out-of-the-money (OTM) cash-secured put and allowing exercise if the put strike is in-the-money (ITM) at expiration. This article will highlight a real life trade with LogMein, Inc (LOGM) which began by selling […]

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covered call writing and put-selling

Should We Favor Put-Selling Over Covered Call Writing?

Many consider covered call writing and selling cash-secured puts the same strategy with the same risk-reward profiles. To me, they are similar with slight differences that must be understood to make a decision as to which strategy to favor. In the end, it will be like selecting between an ice cream sunday topped with whipped […]

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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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risk-reward profiles for covered call writing and put-selling

Comparing Covered Call Writing and Selling Cash-Secured Puts

An accepted myth is that covered call writing and selling cash-secured puts are precisely the same strategy. The reason this statement is generally accepted by many investors is that they have the same risk-reward profiles or profit and loss graphs:   In this article, other similarities will be discussed as well as some distinct differences […]

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buyingh back shoirt options

Cost To Close Our Short Option Positions: Calls and Puts

After entering our covered call writing or put-selling positions, we immediately prepare for possible exit strategy opportunities. All exit strategies begin by buying back the option, call or put. These position management techniques are used to mitigate losses, turn losses into gains and enhance winning positions to even higher levels. This is the reason we need […]

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