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What is the Best Time to Execute Our Trades?

Covered call writing and selling cash-secured puts involve buying and selling stocks and options. We work meticulously to do everything possible to throw the odds in our favor to result in successful trades. Achieving the highest level of returns in a low risk manner is one of our mission statements. I have frequently highlighted the three required skills to become an elite option seller:

  • Stock selection
  • Option selection
  • Position management (exit strategies)

All three of these talents involve trade executions and the timing of these trades are another way of elevating our degree of success. In this article, we will explore the best time to execute our trades for each of these required skills.

 

Initiating our covered call Monthly position (buy stock and sell option)

I initiate my trades during the first week of a Monthly contract usually on Monday or Tuesday after expiration Friday. The reason relates to the time value erosion that Theta has on our option premiums as shown in the chart below:

timing of option-selling trades

Theta: Time Value Erosion of Option Premiums

 

For near-the-money strikes, time value erosion is logarithmic in nature (starts off slowly and then “falls off a cliff”), not linear. If we wait too long, we will lose out on a significant amount of time value premium.

Now, let’s get even more specific. I will enter my initial trades between 11 AM ET and 3 PM ET. The reason for this is to avoid early morning and late afternoon market volatility caused by computerized institutional trading (mutual funds, hedge funds, banks and insurance companies). By limiting our initial trades to these four hours we will avoid most of that volatility and uncertainty.

 

Closing our short call mid-contract

20%/10% guidelines

This is the easiest mid-contract exit strategy to achieve because we can automate it. After initiating the short call sale, set a limit order to buy back the option (BTC) at 20% of the original options sale price in the first half on the contract and change to 10% in the latter part of the contract. For example, if we sold the original option for $2.00, immediately set a BTC (buy-to-close) limit order (GTC-good-til-cancelled) at $0.40 and change to $0.20 mid-contract. A closing trade will be executed based on the price threshold.

Mid-contract unwind (MCU) exit strategy 

This one requires a bit more effort. We close mid-contract when time value component of the option approaches zero which will occur when share price appreciates significantly. When the original trade is opened we can check the option chain to see which strikes are trading near parity (all intrinsic value and time value near zero). Here is an option chain for Facebook from 9/30/2016:

 

exit strategies for Covered Call Writing

Facebook Options Chain from 9/30/2016

 

With FB trading at $128.26, we see the $120.00 strike trading near parity ($0.41 of time value). To close mid-contract the cost-to-close is o.3%. This alerts us to follow the option value whenever our strike is $8.00 or more in-the-money. As a general rule, it makes sense to check the time value component of our sold option whenever share value moves up significantly.

 

Rolling options as expiration approaches- let’s talk Greeks

Since Theta will have a more deleterious impact on the near month strike than it will on the far month strike, it is to our advantage to execute this exit strategy as close to 4 PM ET on expiration Friday as possible. I wouldn’t wait until the very last minute (say 3:45 PM ET) as there may be a glitch in the online broker platform. I usually begin rolling my options about 2:30 PM ET on expiration Friday. If I’m travelling, I may initiate these trades on Thursday. The benefit of waiting until Friday afternoon is small but it does exist.

 

Discussion

The success of a trade is never guaranteed but we can sure throw the odds dramatically in our favor. One way of improving our results is to be cognizant of the most beneficial times to execute our trades.  These times will vary depending on the type of trade being initiated.

 

For more information on executing our initial and position management trades, see both versions of the Complete Encyclopedia for Covered Call Writing and the companion DVD Programs.

Upcoming live events

1- March 21st and 22nd, 2017

Two live Florida events (Fort Lauderdale -22nd and Delray Beach- 21st)

More information click here

2- April 12, 2017

Income Generation Webinar for The Options Industry Council

 

Market tone   

Global stocks moved up this week after the US Federal Reserve stated that it will raise rates gradually and the populist Freedom Party fared worse than expected in Dutch elections. West Crude oil prices were little changed, holding below $50 per barrel on continued high inventories. Volatility, as measured by the Chicago Board Options Exchange Volatility Index (VIX), stayed about the same, at $11.28. This week’s reports and international news of importance:

  • The US Federal Reserve’s rate-setting committee pushed policy rates up another quarter of a percent at its March 15th meeting and indicated that it expects to hike rates twice more this year
  • Chair Janet Yellen said that the Fed’s economic forecasts have not changed since the last rate hike in December and that the pace of future rate hikes would be gradual
  • Yellen also said the Fed has confidence that the economic recovery is robust and is resistant to shocks. Despite the Fed hiking rates at two of its last three meetings, financial conditions are easier today than they were on the day of the Fed’s December hike: Equity prices are higher, the 10-year US Treasury note yield is lower, the dollar is weaker and corporate bond spreads are narrower
  • While the Bank of Japan is not in a position to hike rates anytime soon, the Bank of England might be closer to a hike than markets expected
  • The People’s Bank of China raised its reverse repo rate 10 basis points in an effort to keep the USD/CNY exchange rate stable and limit capital outflows. Thursday’s hike was the second this year. However, China’s official monetary policy benchmark deposit rate remains unchanged. While policy rates outside the United States are unlikely to rise dramatically anytime soon, the trend toward additional accommodation appears to be coming to an end
  • After several weeks of legislative wrangling, the UK parliament this week passed the European Union (Notification of Withdrawal) Bill and the queen has given Royal Assent, clearing the way for the government to begin negotiations to leave the EU. The two-year process is expected to be triggered by the end of this month
  • Support for Geert Wilder’s Freedom Party faded in the final days of the Dutch general election campaign with his party finishing a distant second to the Liberal Party, led by Prime Minister Mark Rutte
  • US treasury secretary Steven Mnuchin is set to meet with his G20 counterparts for the first time this weekend in Germany. Trade and currency issues will no doubt be at the top of the agenda. Mnuchin met with German finance minister Wolfgang Schaeuble on Thursday, with Mnuchin vowing to avoid trade wars while seeking to secure reciprocal trading arrangements

 

THE WEEK AHEAD

MONDAY, MARCH 20

  • Chicago Fed national activity index

TUESDAY, MARCH 21

  • Current account (% of GDP) Q4

WEDNESDAY, MARCH 22

Existing home sales Feb.

THURSDAY, MARCH 23

  • Weekly jobless claims 3/18
  • New home sales Feb.

FRIDAY, MARCH 24

  • Durable goods orders Feb.
  • Markit manufacturing PMI March
  • Markit services PMI March

For the week, the S&P 500 moved up by 0.24% for a year-to-date return of 6.23%. 

Summary 

IBD: Market in confirmed uptrend

GMI: 5/6- Buy signal since market close of November 10, 2016

BCI: I am currently fully invested and have an equal number of in-the-money and out-of-the-money strikes. A 25-basis point March interest rate hike was exactly what the market was expecting.

WHAT THE BROAD MARKET INDICATORS (S&P 500 AND VIX) ARE TELLING US

The 6-month charts point to a slightly bullish outlook. In the past six months, the S&P 500 was up 11% while the VIX (11.66) declined by 27%.

_____________________________________________________

Wishing you the best in investing,

Alan (alan@thebluecollarinvestor.com) and the BCI team

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

41 Responses to “What is the Best Time to Execute Our Trades?”

  1. Jay March 18, 2017 3:33 pm #

    Hey Justin,

    As an overlap comment thank you for your kind words to finish our last thread. Welcome to our merry little bunch!

    I hope you will agree that friends here make keen observations and ask great questions. Alan and Barry are always swift to respond.

    Plus many contributors are starting to share their trades and experiences instead of just asking questions. I know that will make this comment board a more educational and interesting place we will all learn from and enjoy.

    I have as many options trading scars as anyone! I think it is helpful to look at options trading as a pyramid. At the base of the pyramid are covered calls and cash secured puts. Next layer is LEAPS and selling some covered calls on a few of those. Then there is debit and credit spreads. Finally you get up to buying calls and puts as speculation. That can be a lot of fun or a lot of pain so don’t spend much money doing it up there at the top of the pyramid!

    Unfortunately what a lot new options traders do is start at the top of the pyramid and work their way down as losses grow instead of starting at the bottom and working their way up as knowledge grows. – Jay

    • Roni March 19, 2017 6:13 pm #

      Hi Jay,

      you came very close with your identification of the animal in Justin’s picture, and you certainly hit the spot with the second specimen :-)
      Quokka’s girl friend is really beautiful.

      Roni

  2. Justin March 18, 2017 10:12 pm #

    Jay,

    You’re welcome! and yes there’ve been some very educational questions and answers on the blog (I’ve been taking extensive notes) as well as Alan’s excellent articles of course. Do you have more option scars from cc’s or the alternatives strategies? Bull put credit spreads look promising, though I’ve been focussing mainly on cc’s thus far.
    Re new traders it’s very much like poker – the vast majority do little if any research or study and just gamble blindly. That will never change unless human nature does. Only a small minority will ever put in the effort to achieve true mastery, whether it’s trading, poker or anything else.

    Justin

    • Jay March 19, 2017 12:57 am #

      Justin,

      Thank you for your kind reply. It’s a brand new thread and I hope everyone has a great trading week.!

      I can’t think of a single scar from selling a covered call. I have a lot of lost opportunity and ass kick moments out of hind sight greed :)! But that is very different from losing money.

      Where I lost money was buying options on directional speculation. At the top of the pyramid I mentioned. – Jay

      • Justin March 19, 2017 5:41 pm #

        Yes I also fooled around with buying naked puts and calls way back in ’86-’87 with mixed success, but gave it away due to high commissions (about 5% in each direction if I recall correctly) and stuck to buying and selling stocks using t/a and later f/a as well.

        Alan,

        Something that just occurred to me – with a five week cycle now upon us, do you find any advantage in waiting until week two to open new positions, or doesn’t it really matter?

        Justin

        • Roni March 19, 2017 6:51 pm #

          Hi Justin,

          I was writing the same question to Alan about the 5 weeks cycle when you posted it.

          As for the AMGN conundrum, I have the same trouble every time this happens to me, and it happened manny times since I started with the BCI methodology 3 years ago.

          Alan cals it a “frustrating” event, and your next step is not easy to decide. It depends on many different aspects to consider, such as your risk tollerance, market tone, etc. etc.

          In my short experience, there is a 50/50 chance for the stock to recover, and I prefer to unwind and bet my money on a different soldier where I have an edge.

          Roni

          • Justin March 20, 2017 5:54 pm
            #

            Amazing – I haven’t seen that question asked anywhere on the blogs and we both asked it at the same time :)

        • Alan Ellman March 19, 2017 9:18 pm #

          Justin,

          We can wait a few days into the contract but my preference is to sell during the first week of a 5-week contract, usually within the first 3 days. For a 4-week contract I usually execute my trades on Monday, Tuesday at the latest.

          Alan

          • Jay March 20, 2017 12:18 am
            #

            Alan,

            I hope your move to Florida is going/went well. Welcome to the Deep South! As I joke with my friends up North I miss the fall colors. And it gets hot as hell down here. But I have never had to shovel humidity off my driveway :). As you know but many of our new friends here would not I live in New Orleans.

            I like the 5 week months because this week I will have more time to leg in while still having good time decay remaining to sell. Many here – perhaps including you and Barry – will disagree with me but I leg into new covered call positions.

            I can never predict it and and nothing works all the time. I simply found my results improved when I bought stocks on down days then sold calls on up days. I never do it on the same ticket and rarely the same day. The market is usually volatile enough in any given week to support that – and the 5 week months help :).

            There are a thousand ways to play this crazy game!

            A point I may not have made as clearly as I should have in my note above to Justin is the reason I never felt scarred or burned by a covered call or cash secured put is the sold option is never the risk. It is what underlies it.

            Plus when you own something if you chose it with care it is almost certain to bounce back sometime and owners can wait. I’ll bet AMGN does that.

            But when all you own is a bet with a short shelf life when it goes against you time decay piles on and you lose money in a hurry!

            A successful week to all. – Jay

        • Alan Ellman March 20, 2017 7:48 am #

          Jay,

          Thanks for sharing your trading style approach to 5-week contracts. Member feedback is an important element to the learning process we all benefit from.

          “The risk is in the stock, not in the sale of the option” You have heard and read that from me for more than 10 years. Thanks for bringing that concept back to the forefront. By selling a covered call, we are lowering our cost basis and increasing the chances of a successful short-term investment.

          Alan

  3. Barry B March 18, 2017 11:03 pm #

    Premium Members,

    This week’s Weekly Stock Screen And Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 03/17/17.

    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 link to the BCI YouTube Channel is:

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

    Best,
    Barry and The BCI Team

  4. Roni March 19, 2017 5:44 pm #

    Alan,

    I am always amazed. Each of your articles contain a fresh and valuable lesson for me.
    This time it is the MCU exit strategy, which was not clear to me until now.

    One more question : Is the best time to initiate your trades the same in 5 weeks monthly contracs as in 4 weeks months ?

    Roni

    • Alan Ellman March 19, 2017 9:20 pm #

      Roni,

      See my response to Justin above…Alan

  5. Haney March 20, 2017 7:41 am #

    Alan, you mention that you’re “fully invested.” Just curious…. invested in what?

    I realize you’re providing a screening service. I’d like to know what the screening process is steering you to invest in.

    Thanks Alan.

    Haney

    • Alan Ellman March 20, 2017 10:59 am #

      Haney,

      In this venue, I only speak of the stock portion of my portfolio (not real estate, bonds etc.). When I say that I am fully invested I am referencing the cash allocated to stocks and stock options. I am usually fully invested with rare exceptions like pre-Brexit and pre-election.

      The screening leads me to which stocks and options to select for the current contract month. All my selections come from our premium stock and ETF reports.

      Alan

      • Haney March 21, 2017 8:39 am #

        That answers my question… sort of.

        Of the weekly recommendations you provide, specifically which ones are you actively participating in? There are so many from which to choose – which ones attract you? And is this something you could publish along with your weekly list as a further guide to your subscribers?

        Thank you Alan.

        • Alan Ellman March 21, 2017 10:50 am #

          Haney,

          Our premium member reports reduce the universe of eligible stocks from over 8000 to 30-60. From there we select. Our members use these reports in ways that meet their needs, goals and trading styles. For example, some members like stocks that also generate dividends. Some use price as a guide based on the amount of cash available. Our current list has stocks ranging in price from $10/share to $290/share.

          One very popular way some of our members use these reports is to favor stocks in bold (best technical indicators) along with industry ranks of “A” and “B”

          Check out the videos on the bottom of the membership link:

          http://www.thebluecollarinvestor.com/membership/

          There are many ways to utilize our reports and an approach that is right for one investor may not be the best for another.

          Alan

  6. George March 20, 2017 10:48 am #

    Hi Alan,

    I’m happy with the Schwab option last week so it pushed me to reread the encyclopedia this weekend. Glad I did because it took some of the emotion out of me so I can go back to the Elman calculator for support.

    The strategies I’m considering using are ITM call covered calls and a layering strategy as you discussed briefly in the encyclopedia. But I’m still not comfortable with ITM calls. On the surface, it looks as if ITM calls could be called as soon as you sell the option.

    [1] I think page 296 alludes to the answer but can you explain to me why ITM calls aren’t exercised right away?

    [2] I want to try a layering approach while still training. Are you stating that once a stock’s technicals and market tone are determined, layering might be fruitful all in one direction – OTM, ATM or ITM? – or – Are you stating that layering despite the direction of the stock or market, chose a stock and then do a combination of 2-3 directions all at the same time?

    George

    • Alan Ellman March 20, 2017 11:34 am #

      George,

      The main reason ITM strikes are not exercised early is that the option holder will lose time value when capturing intrinsic value. In other words, the option buyer will make more money selling, rather than exercising, the option.

      Additional reasons include less capital risk and leaving the cash in an interest-bearing account while still controlling the shares.

      When laddering strikes, we look at overall market assessment, chart technicals and personal risk tolerance. From there we decide on the makeup of the option strikes in our portfolio…the more bullish the more OTM strikes are used.

      Alan

    • Geoff March 23, 2017 7:23 pm #

      George, the buyer of a call option is going to buy time/volatility from you, the seller. You would not sell an option for no return. There is a risk transfer that is happening much like with insurance. You are selling away some upside potential in exchange for a guaranteed return.

      On the buyer side, they’re buying the potential gain in a stock in exchange for a small capital investment. Many of these “lottery tickets” expire worthless or with less value than they were bought for (intrinsic value).

      Let’s say a stock is trading at $52 / share. You sell a $50 call against the position. The call is clearly ITM. The call buyer is going to pay you $2 / share plus time & volatility premium. Let’s just say it’s $2.75 for the call. I’m going to only focus on stock price change here for simplicity sake. The call buyer will not make any return on the option until the call goes to $52.75 / share. If the call buyer is interested in the stock immediately, it is far cheaper to simply by the stock in the open market for $52 / share and only one commission.

      An ITM option with time value remaining is unlikely to be exercised early unless there is an ex-dividend date coming up. Unless there is a very thin market (very wide bid/ask causing value loss, AKA slippage) the call will more likely be sold to someone else.

      Note: All American options can be exercised at any time up through expiration. It’s really nothing to worry about as you’ve already decided to sell the stock at that price and you’ve made peace with the return per risk you’re receiving.

  7. Justin March 20, 2017 6:05 pm #

    Alan et al,

    Is this a bad time for CC writing with the VIX being so low? I can see a few possible trades – LITE, CGNX, TREX, STLD, AEIS, PAYC. Am I missing many here?

    Justin

    • Jay March 20, 2017 8:24 pm #

      Justin,

      That is a fantastic question. I look forward to the conversation it generates. And since I am part of “et al” here are my thoughts:

      I doubt there is ever a bad time for covered call writing :). What works for me is targeting a specific dollar amount I want to generate from option sales each month. Since I am retired it is typically what I spend plus taxes and a little extra since the market is the market and I am just not that good at predicting it!

      I like to let most of the things I own run uncovered unless I need cash flow or am bearish. I sell covered calls on my holdings in the order of their Beta, lowest first. So I cover SPY before NFLX. Which of those horses is more likely to run? I would rather the heavy jockey – me – be sitting on SPY with a covered call than on NFLX :).

      VIX is always interesting. I trade it frequently. I have simply found sticking to a cash flow target, selling enough options to hit it then leave the rest alone cuts the mustard for me. -Jay

    • Roni March 21, 2017 11:56 am #

      Hi Justin,

      The DJIA has dropped 180 points as I write.

      I bought 600 STLD shares yesterday at 36.52 and sold 6 STLD 04/24/2017 37.00C for 1.02 simultameously.
      Was it a good time ? yes. ROO = 2.8% + potential for 1.3% if stock is above 37.00 in 5 weeks.
      Now STLD is trading at 34.75 and my break even is 35.50, so I’m “loosing” $75.00 per contract, = 2%, so I am not worried (yet).

      Is it a bad time for CC trades ? I think that nobody knows.

      Roni

      • Justin March 21, 2017 4:29 pm #

        Thanks Roni & Jay,

        Jay you appear to have a mix of strategies – apparently you’re not trying to make big money, but are just satisfied with smaller and safer returns – have you decided then that cc’s on stocks alone are too volatile/risky?

        Roni I’m paper trading all the ones I mentioned, and STLD is interesting as the last two times it sank to around 33-34 it bounced back up again. The volume on today’s fall was nothing special so I’m just holding too.

        Justin

        • Jay March 21, 2017 5:47 pm #

          Justin,

          Please allow me to clarify my comments: I would love to make as much money as the market can give me at my risk level :)

          I learned from Alan that covered calls are not risky. But the stuff you write them on can be. And, conversely, covered call writing – at least to me – can be frustrating if you do that alone on growth stocks that have a great month.

          Please also permit a minor semantic change to your comment that may better explain my thinking: I use a mix of tactics. The strategy never changes: use the market, not my nest egg, to pay my bills.

          That means covered calls, cash secured puts, credit spreads, condors, option buying, dividend capture and sometimes just plain old letting good horses run unsaddled! – Jay

        • Roni March 22, 2017 11:02 am #

          Justin,

          Thanks for the moral support on STLD.

          I admire your commitment to master the CC game before placing your hard earned money on the line.

          On the other hand, I believe it’s difficult to learn this way, because the most important lessons come from mistakes that really hurt, and decisions made under the influence of the emotions caused by fear and greed, which are absent when you are paper trading. No pain, no gain.

          Roni

    • Geoff March 22, 2017 7:22 pm #

      “Is it a bad time to write coveted calls because the VIX is so low?”

      Believe it or not, the market has still been pricing IV ahead of what becomes realized volatility, e.g. you’re still getting a rich premium. That said, there may be a bit more risk that if volatility spikes that you may be left holding an “underpriced” short option. Here’s the thing, when you initially sell that option, you’re using the best information you and the market have available.

      Alan has developed a great system for pretty consistent profits. The best part is while I have come to understand the genius of the system, you don’t have to understand the system to make consistent profits. I’m too technical to communicate as well as Alan does to bring it to an average person to just follow the rules. Outside of that, you can tweak a few things as they’re considered guidelines instead of absolute rules–market conditions change, sometimes frequently. Just look at the dead money in Financials all of ’16 until November-January when they were killing it. Now they’re collapsing a bit (compared to the market overall, anyway. I might be choosing strong language for a 5% pullback). And now leadership has switched to Utilities with a few sectors trying to find a direction while others are just plain bad.

  8. MarioG March 21, 2017 8:30 am #

    Alan,

    Looking forward to hearing your lecture today March 21 in Delray Beach tomorrow. Welcome to Florida.

    Sharing some experiences –
    Comment on Mid contract unwind.- Stock gaps up or appreciates significantly.
    I look at the current ROO% and divide by 10. If 2.5%, loss of .25% is acceptable or slightly less since the commission add a small loss. (Glad Fidelity lowered their commision rate.).

    i will then buy to close if time value I can get playing the spread satisfies that. I can use the released cash to enter a new CC and get 1.5- 2% in Week 1,2, and even week 3. Continuing.

    It is also VERY important if you are unwinding to use a Buy-Write Sell order with does it on in one transaction and saves a commission. If you do it in 2 steps the stock price might change significantly going through the steps and its more work. I calculate the Stock price – the premium and play the spread on the credit limit. If it does not trade withing a short time, reduce your credit till trade is filled.

    I have accounts with OptionsHouse and Fidelity. I have benefited from the differences in the two platforms. I was doing the unwinding in two steps until 2 months go (after 8 months) when i pressed for some answers or discovered some solution myself.. Buy-Write Open were no problem. In Fidelity – in a Watchlist or Positions view, there is an EXIT STRATEGY option (right click) I discovered one day to do a Buy Write Sell. Just change the Buy-Write to a sell order.

    In Options House, if you click on the Covered Call line in Positions view, you will get a Buy-Write ticket and if you select Sell the Share will sell and the Option will Buy To close.

    I am also doing the Expiration Friday Rolls in a limit order now in one step. Works same way in Fidelity (Exit Strategy) and in OptionsHouse you have to add a leg. With the limit order, no matter what happens to the price, you will still meet your reward goals.

    On Expiration Friday, if I see that on Thursday the Buy to Close is only .0.1% on a 2% or more gain, it is less pressure on me to roll it at that time. I am usually 92% invested with 12 or more options positions in 4 accounts (Retirement and Non-Retirement) with 9 different securities. So I start 10-11am so I can make it through the day. I calculate my numbers on paper quickly now and am increasing my efficiency as I understand the mathematics process..

    Mario

  9. Alan Ellman March 22, 2017 6:26 pm #

    Premium members:

    This week’s 8-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 as well as the implied volatility of all eligible candidates. For your convenience, here is the link to login to the premium site:

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

    NOT A PREMIUM MEMBER? Check out this link:

    http://www.thebluecollarinvestor.com/membership.shtml

    Alan and the BCI team

  10. Justin P. March 22, 2017 6:51 pm #

    Lite still looks promising:

    • Geoff March 24, 2017 1:14 pm #

      LITE is doing well. It’s a very volatile ride. I took one of the few losses I’ve had with BCI on LITE last year. That doesn’t actually matter to current day or going forward, at all. But, it’s a small cap and it can go up sharply and down sharply. You’ll need to make your own risk tolerance decisions, but if I was playing it here I’d be pretty ITM on the strike. The premiums are rich because of the excessive volatility.

  11. Alan Ellman March 22, 2017 6:54 pm #

    Florida Seminar photo:

    CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG

  12. David March 23, 2017 5:20 am #

    Alan-

    I am a new member and am really enjoying all of the great content. I have three questions for you:

    -it seems that for many securities, there are option settlement dates every week–not just on the 3rd Friday of the month. Is there any reason not to sell calls at times other than the 3rd Friday?

    -I have recently inherited a portfolio of stocks that I want to (for the most part) exit. These are not generally on your watch lists. Any reason not to sell calls on my way out of these stocks if I want to dump them anyway?

    -my preferred security selection strategy is pretty conservative–to buy high quality ETFs that match my desired allocation model. These are not high flyers, but have lower VICs than many of the ETFs on your watch list. Is there any reason I should not continue to invest in these lower volatility ETFs and also sell calls against them?

    Thank you!
    David

    • Alan Ellman March 23, 2017 8:31 am #

      David,

      My responses:

      1- There are hundreds of stocks that have Weekly expiration options in addition to Monthlys. There are thousands with Monthlys. I prefer Monthlys because all my positions close on the same date, simplifying management. They also allow more time for position management. Investors who use Weeklys believe that higher annualized returns can be realized. They also can assist in circumnavigating earnings reports and ex-dividend dates. Finally, Weeklys results in quadruple the number and amount of commissions. I believe that success can be achieved with both Weeklys and Monthlys but I’m happy to share that my personal preference is Monthlys.

      2-Selling calls on shares you are planning to sell is a great way to generate additional income before selling.

      3- Using the type of underlyings that support the trading style and personal risk tolerance that meets your comfort level is absolutely the right thing to do.

      Alan

    • Roni March 24, 2017 3:23 pm #

      Hi David,

      like Alan I normally prefer monthlies, for the same reasons.
      And I have also noticed that most of the weeklies have very low Open Interest (OI), usually under 100.
      One important guideline in the BCI methodology, is to sell calls with OI of at least 100.

      Roni

  13. Justin P. March 24, 2017 1:06 am #

    I’ve recently discovered the ‘Daily CC Checkup’ – are many people using that here? It seems quite good (not to mention colorful.)
    As a longtime Excel user since Ver 1.0 circa ’89 I could point out some very useful improvements though :)

    • Alan Ellman March 24, 2017 8:10 am #

      Justin,

      Yes, this is a tool used by many of our premium members. I am always open to suggestions that would improve any of the tools we provide to our members. This tool was initially developed by David, one of our members, and I worked with him over a period of 3 months to get to the current spreadsheet. Mail your suggestions directly to me and my team and I will have a look. Thank you.

      Alan

      • Justin P. March 24, 2017 4:13 pm #

        Alan,

        No problem, I can send you a copy of what I’ve been working on soon. It’s basically a work in progress, the main idea being to integrate all your Excel tools into one workbook. The Unwind, What Now and Tax sheets could then be populated with data from the DCCC sheet with just the click of a button.

        Right now I’m just trying to get my head around those formulas on the DCCC – would you be able to verify that the formulas in column V are giving the correct results? (I might have altered them with all my chopping and changing.)

        Justin

        • Barry B March 25, 2017 3:05 pm #

          Hello Justin,

          Please send me a copy of your “work in progress” spreadsheet(s) as well. I’m working on enhancing our covered call, put, and P-C-P calculators.

          My email, address is: barry@thebluecollarinvestor.com

          Best,

          Barry

          • Justin P. March 25, 2017 4:26 pm
            #

            Hi Barry,

            No problem, I’ll get that done shortly.

            Btw a couple of my replies to Jay and Roni are still ‘awaiting moderation’… :)

            Justin

  14. Justin P. March 24, 2017 11:49 pm #

    Actually I think I see what’s happening with Col V now – the attached comment says “…ONLY on expiration day…” – thus there won’t be a time value component and the figures will be correct on that day.

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