Comments on: The CBOE BuyWrite Index (BXM) vs. The BCI System https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/ Learn how to invest by selling stock options. Wed, 26 Jun 2013 21:56:43 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15469 Wed, 26 Jun 2013 21:56:43 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15469 Premium members:

This week’s 6-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options.

For your convenience, here is the link to login to the premium site:

http://www.thebluecollarinvestor.com/member/login.php

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Alan and the BCI team

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By: Alan Ellman https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15302 Mon, 24 Jun 2013 11:53:20 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15302 In reply to Bill.

Bill,

I believe that it is a valuable exercise to view the option trade from the other side from time to time to get a different perspective and understanding of options trading.

In this case, the high IV of the options means that the market is anticipating a large price movement prior to expiration and the reason centers around the earnings report. As you can see on the chart below the price has moved dramatically over $20 after the last 2 reports (see the $ signs). This price change can occur in either direction.

For purposes of responding to your question, let’s assume the price increased by $20 instead of declining as it did in the past 2 reports. Let’s first do the math as a stock buyer:

Buy @ $100 and sell @ $120 for a 20% profit

Now as an option buyer:

Buy the $105 call @ $8 and strike ends up $15 in-the-money for a minimum value of $15 (allotting no time value to the premium):

Profit = 15 – 8/8 = 87.5%

More than quadruple the return for the option buyer (compared to the stock buyer) IF the trade worked out the way he (she) hoped it would.

CLICK ON IMAGE TO ENLARGE AND USE THE BACK ARROW TO RETURN TO BLOG:

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By: Alan Ellman https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15299 Mon, 24 Jun 2013 11:29:57 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15299 In reply to Tom.

Tom,

I use the Yahoo site (www.finance.yahoo.com) in my books and DVDs because it is a reliable free site. There are many others. Other choices:

1- Your brokerage compoany will have access to option quotes

2- http://www.cboe.com (quotes and data)

Alan

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By: Bill https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15297 Mon, 24 Jun 2013 11:22:35 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15297 Hi Alan,

I am a newbie to Options Trading and my research into a conservative initial approach has led me to covered calls which in turn has led me to your great website.

I am going through the self-education phase and I am enjoying your website and your beginners videos greatly – Thank You !
It is my intention to lear more about the BCI methodology and probably to subscribe to your service.

I have a question for you regarding the question from Paul re MLNX stock option call with an $8.00 price.

I understand your explanation that this represents almost all Implied Volatility and that from the Seller’s viewpoint there is a higher risk of stock downside associated with the seemingly too good to be true price.

What I am struggling to understand is the “other side of the coin” – ie. the market or buyer’s perspective: Why would anyone be prepared to pay $8.00 for a stock option which in my mind (and very limited knowledge at this stage) represents also a high degree of risk to the buyer ?

Is it just that it is the belief/expectation of a number of buyers, for whatever reasons, that the stock will go up by that amount.
If you have a few moments for a brief reply it would be greatly appreciated.

Kind regards,
Bill

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By: Tom https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15296 Mon, 24 Jun 2013 10:40:31 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15296 Alan,

Can you suggest the best places to get a list of option price quotes? In your books you seem to favor Yahoo.

Thank you.

Tom

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By: Barry B https://www.thebluecollarinvestor.com/the-cboe-buywrite-index-bxm-vs-the-bci-system-2/#comment-15185 Sat, 22 Jun 2013 20:20:41 +0000 http://www.thebluecollarinvestor.com/?p=8187#comment-15185 Premium Members,

The Weekly Report for 06-21-13 has been uploaded to the Premium Member website and is available for download.

Also, be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them at The Blue Collar YouTube Channel. For your convenience, the BCI YouTube Channel link is:

http://www.youtube.com/user/BlueCollarInvestor

Best,

Barry and The BCI Team

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