click ↑ 4 Featured

When we sell covered call or cash-secured put options, there are 2 dates we should factor into our trade decisions. Earnings reports (ER) dates must be considered 100% of the time and ex-dividend dates are important in certain specific scenarios. In this article, a real-life example with PulteGroup, Inc. (NYSE: PHM) will be used to demonstrate how to navigate around these 2 dates.

What are earnings report dates?

These are quarterly filings made by public companies to report their earnings and revenue performance. In the BCI methodology, these should always be avoided, in terms of no option in place, 100% of the time. This is because of the inherent risk from a disappointing ER.

What are ex-dividend dates?

Latest date a shareholder must own a stock to be eligible to receive an upcoming dividend distribution. Ex-dates are the main reason for early exercise. If share retention is an integral part of our trading system, these dates must be avoided when trading options.

PHM on the 8-2024 Premium Stock Report 

Overview & closeup images

        • The ER date (red oval) is on 10/22/2024
        • The last ex-date was on 6/18/2024 (green oval), so the next is projected to be on 9/18/2024
        • Let’s assume we do not want to be subjected to early exercise, we want to avoid both dates
        • PHM has weekly options, so we will seek the 9/13/2024 expiration dates which does avoid both

         

PHM option-chain on 8/12/2024 for ITM and OTM strikes

  • The $120.00 ITM strike shows a bid price of $6.00
  • The $127.00 OTM strike shows a bid price of $2.50
  • Both strikes show a wide bid-ask spread which is negotiable to higher prices, but we will use the worst-case scenarios of these published prices

PHM initial ITM and OTM calculations using the BCI Trade Management Calculator (TMC)

  • The ITM $120.00 strike shows a time-value return of 2.48%, 27.47% annualized (brown cells) based on a 33-day trade
  • The ITM $120.00 strike shows a downside protection (of that time-value profit) of 2.45% (purple cell)
  • The OTM $127.00 strike shows a time-value return of 2.03%, 27.47% annualized (green cells) based on a 33-day trade
  • The OTM $127.00 strikes shows an additional upside potential of 3.24% (pink cell) if share price moves up to or beyond the OTM strike
  • The breakeven price points are shown in the yellow cells

Discussion

The 2 key dates we should be aware of when trading options are the ex-dividend dates and earnings report dates. The former is the main reason for early exercise and the latter represents inherent risk if we are exposed to these reports.


Stock Investing for Students: 12-part video series with Downloadable workbook

Self-investing starting at a young age can ensure a successful financial future and an early and comfortable retirement. So why is nobody doing this and taking advantage of the power of compounding? Change your thinking. Create a goal. Utilize the rich BCI methodology to facilitate your plan. Financial independence is achievable. Start today!

“Success depends upon previous preparation, and without such preparation there is sure to be failure”

Click here for more information and to view video.


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

Hi Alan, 
 
The webinar you did last night was great. Especially the Q&A. You did great.
 
Thanks,
George
 
Recent Quasar Market Live interview
 

Upcoming events

1. BCI-only Webinar

1/16/2025

8 PM ET – 9:30 PM ET

The Collar Strategy: Covered Call Writing with Protective Puts

Protecting covered call trades from catastrophic share loss 

This is the strategy Bernie Madoff pretended to use. He called it the split strike conversion strategy, but it was simply a collar. The covered call sets a ceiling on the trade and the protective put guarantees a floor on the trade.

Topics discussed

  • What is the collar strategy?
  • Uses for the collar
  • Entering a collar trade
  • Option basics for calls
  • Option basics for puts
  • Real-life example with NVDA
  • What is an option-chain?
  • Real-life example using the BCI Trade Management Calculator (TMC)
  • Strategy pros & cons
  • Educational products & discount coupon
  • Q&A

Click here to register for free.

2. Long Island Stock Investor Group Part I

Zoom

February 13, 2025

7:30 – 9:00 ET

Private investment club

Covered Call Writing Dividend Stocks

 

3. Las Vegas Money Show

February 17 – 18, 2025

  1. Ultra Low-Risk Approaches to Covered Call Writing and Selling Cash-Secured Puts
  2. Covered Call Writing Technology Stocks

Register here.

4. Long Island Stock Investor Group Part II

March 13, 2025

7:30 – 9:00 ET

Private investment club

Cash-Secured Puts: 2 Outcomes

5. MoneyShow Masters Symposium Miami 2025

Thursday May 15, 2025

Details to follow.

Alan speaking at The All Stars of Options event in Las Vegas