Comments on: Analyzing a Rolling-Up Covered Call Writing Trade: A Real-Life Example with Sinclair Broadcast Group, Inc. (NASDAQ: SBGI) https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/ Learn how to invest by selling stock options. Thu, 01 Jul 2021 10:15:18 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432807 Thu, 01 Jul 2021 10:15:18 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432807 In reply to Jonathan.

Jonathan,

The BCI guidelines for option liquidity is: Open interest of 100 contracts or more and/or a bid-ask spread of $0.30 or less.

Our reports:

Stock: The 3rd column from the right (NTM OI > 100 Contr) identifies which securities meet our guidelines with a “Y” or “N” The reason we leave those with an “N” is that open interest can change and some members use our reports for buying and selling stocks without the option components. We make it easy for our members to identify which stocks meet our guidelines at the time the reports are crafted.

ETF: All ETFs in our mid-week reports meet our guidelines.

Blue Chip (Dow 30): All Dow 30 stocks have robust option liquidity

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432793 Thu, 01 Jul 2021 09:56:27 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432793 In reply to Jash.

Jash,

These scenarios are extremely rare especially if we avoid earnings reports, a critical BCI rule.

That said, to avoid significant losses we can add protective puts to our covered call trades, a strategy known as the “collar strategy”

Here is a link to one of the articles I published on this topic:

https://www.thebluecollarinvestor.com/protective-puts-and-the-collar-strategy-selecting-the-best-strike-prices-last-chance-for-holiday-orders/

For more details on the collar strategy:

BOOK:

https://thebluecollarinvestor.com/minimembership/covered-call-writing-alernative-strategies/

ONLINE VIDEO COURSE:

https://thebluecollarinvestor.com/minimembership/video-the-collar-strategy/

CALCULATOR:

https://thebluecollarinvestor.com/minimembership/collar-calculator/

Alan

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By: Jonathan https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432798 Thu, 01 Jul 2021 06:55:00 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432798 Hi Alan!

Quick question. After looking over your reports for a couple of months now and scanning thru the stocks I find quite a few of them have low OI or Volume. Thus it’s tough to enter a CC with this low liquidity.
Do you screen for these at all? And what is your min required OI or Volume to enter such a trade when writing CCs?

Thank you!!!
Jonathan

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By: Jash https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432790 Thu, 01 Jul 2021 05:49:22 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432790 Alan,

Sorry to bother you. But what I am worried about is that if stock declines rapidly like 50% or so next day when market opens. How can we protect in this situation?

Thank you

Jash

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By: Alan Ellman https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432577 Wed, 30 Jun 2021 21:01:15 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432577 Premium members:

This week’s 4-page report of top-performing ETFs and analysis of the top-performing Select Sector SPDRs has been uploaded to your premium site. One and three-month analysis are included in the report. Weekly performance has also been incorporated into the report although not part of the screening process. Weekly option availability and implied volatility stats are also incorporated.

The mid-week market tone is located on page 1 of the report.

New members check out our ongoing and never-ending training videos (“Ask Alan” and Blue Hour webinars). We add at least one new video each month. Only premium members have access to the entire library of these training tools.

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

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By: Alan Ellman https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432359 Wed, 30 Jun 2021 11:19:23 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432359 In reply to Marek.

Marek,

The BE price point is $120.92 as stated in the book. This means that if the option expires worthless, and the share price is above the BE, we have an unrealized gain and vice-versa.

Now, if we add one or more additional steps to the trade via exit strategy execution, the BE price point will change and it can change multiple times if we execute several position management maneuvers.

All covered call trade exit strategies start by entering our 20%/10% BTC limit orders.

Here is a link to an article I published related to this topic:

https://www.thebluecollarinvestor.com/using-the-ellman-calculator-to-monitor-hitting-a-double-results/

Alan

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By: Marek https://www.thebluecollarinvestor.com/analyzing-a-rolling-up-covered-call-writing-trade-a-real-life-example-with-sinclair-broadcast-group-inc-nasdaq-sbgi/#comment-432176 Tue, 29 Jun 2021 22:21:03 +0000 https://www.thebluecollarinvestor.com/?p=19932#comment-432176 Alan,

I have just come across your youtube podcasts and short videos and I have become a fan of your method. I heard about the covered call writing before (in my trading I only bought calls, never actually wrote them), but your method is described with such simplicity that I think I have already watched most of your material. Next step will be to do some fundamental and technical analysis and start paper trading.

One question though on the subject of breaking even:
You mention that you calculate your break even point as “purchase price of the share – the total option premium”.

From your example in one of the books:
Cost of the stock – $128.02
Premium from $125.00 call – $7.10
Break Even point: $120.92 (being $128.02 – $7.10)

However, if I want to close the position by selling the shares at $120.92, I still need to buy back the options, so at that price I am not breaking even. Am I missing something here? Is the break even point calculated as: “price from sale of the shares – the cost of buying back the option”, or is there any other better exit strategy that I did not think of. Please kindly advise.

Regards,
Marek

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