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Tag Archives: implied volatility
Covered call writing and technical analysis

Special 1-Time Cash Dividends for Stocks with Improving Technicals

Covered call writing and put-selling candidates must pass a series of fundamental, technical and common-sense screens in order to be considered eligible for our portfolios. In early January 2017, one of our members, Jim W, asked about using Ford Motor Corp. (F), a stock that does not pass our BCI screens but has several positive […]

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Calculations When an Unexpected Earnings Report is about to be Released

Never write a covered call or sell a cash-secured put if there is an earnings announcement due prior to contract expiration. This is such an important rule in the BCI methodology. However, we all know that life is not perfect and sometimes we are thrown the proverbial “curve ball” Earnings reports come out every quarter or […]

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implied volatil;ity and standard deviation

Probability Analysis when Using Covered Call Writing or Selling Cash-Secured Puts

Whether we are selling covered calls or cash-secured puts we frequently look to our broker platforms for ways of enhancing our trading success. As these platforms become more sophisticated and competitive, there are a myriad of software analytical programs offered including those geared to probability analysis. A typical program will use implied volatility stats to determine […]

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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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covered call writing calculations

Calculation Rules: Making Sense Of A Trade That Makes No Sense

Understanding option calculations is a necessary skill to become an elite covered call writer. The Ellman Calculator will do all the legwork but accurate and meaningful results are dependent on appropriate inputs. To highlight this point, let’s look at a real-life trade sent to me by Catherine who trades on the Toronto Stock Exchange:   […]

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volatility and covered call writing

Comparing Implied Volatility and Historical Volatility During Earnings Season

When selecting stocks and options for covered call writing and put-selling we factor in volatility, both implied and historical. Historical Volatility (HV) is the actual volatility of a security over a given time period. HV is calculated by determining the average deviation from the average price based on one standard deviation (expected to be accurate 67% of the time).  Implied volatility (IV) is […]

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Option Greeks

Why Would Call Option Value Decline If Stock Price Rises? Evaluating Option Greeks

Covered call writers and put-sellers know that option value is impacted by the change in stock price by the amount of its Delta. Delta, one of the option Greeks, is defined as the amount an option value will change for every $1.00 change in share value. If a call option priced at $2.00 with a […]

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volatility and covered call writing

A Review of Volatility and its Impact on Option-Selling

When we write covered calls or cash-secured puts, we are selling volatility. The time value component of a short-term option premium reflects the amount of time until expiration plus the volatility of the underlying security. Since most of us are comparing options with similar expirations, the volatility of the stock or exchange-traded fund represents the […]

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volatility and option-selling

Using Volatility to Predict Future Stock Prices

Volatility is a key consideration for both stock selection and option-selling decisions. Despite its relevance to our covered call writing and put-selling selections, volatility does have its limitations and we must fully understand how we can best take advantage of the information gleaned from volatility statistics.   Types of volatility Historical volatility: The annualized standard […]

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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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