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Ask Alan #146 – “The Cost of Rolling Out and UP”

Alan answers a question posed by Carl, who asks:

I am concerned about the cost to roll options when a stock price increases and I want to keep the stock. When I buy back an in-the-money option and roll out-and-up and then the price of the stock goes down, I am actually losing money in some cases. Should I just consider selling only deep out-of-the-money options to avoid these potential losses?
Thank you,
Carl

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It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#146, “The Cost of Rolling Out and UP”

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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.

5 Responses to “Ask Alan #146 – “The Cost of Rolling Out and UP””

  1. Alan Ellman May 9, 2018 5:34 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.

    New members check out the video user guide located above the recent reports.

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

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

    NOT A PREMIUM MEMBER? Check out this link:

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

    Alan and the BCI team

  2. Joanna May 10, 2018 4:26 am #

    Alan,

    I have read two of your books from cover to cover, watched pretty much every video you have ever made, (a few of them over and over so the topic really sinks in), and have been reading your blog posts. I have been practicing in Thinkorswim’s paper money platform for the last 3 months. Lastly, I have been involved in 4 covered calls using my actual money in the last 2 weeks….2 ITM, and 2 OTM just to see how they act/compare/contrast on a daily basis.

    I have to say that I’m really loving the covered call strategy immensely! I think some people do not realize that it isn’t a get rich scheme. It’s all about how to become slowly but steadily more and more wealthy, albeit at a faster rate than just buy and hold. The 2 greatest things I have come to love is 1. how all the small things add up impressively at the end of each month. For example, an OTM premium may only fetch say 75 dollars, but if your account as a whole is trading 6 or 7 contracts, then that’s basically worth the equivalent of many people’s monthly car payment! And 2. the eighth wonder of the world (as you have said) known as compounding. Thank you for doing what you do every day! I now have hope for future financial freedom, where I once never thought it could ever be possible. This year is the first year I can contribute 6500 instead of 5500 into my Roth IRA, and you better believe I’m going to go full force for the next 15 years in that account with covered call writing!

    Joanna

    • Alan Ellman May 10, 2018 8:30 am #

      Joanna,

      You made my day!

      Please stay in touch.

      Continued success,
      Alan

    • Jay May 10, 2018 11:09 am #

      Hey Joanna,

      Compliments on your 15 year plan! There are a few old retired farts like me here who likely wish they had started selling options in IRA’s earlier :). So you are well ahead of the game!

      The key for me was saving and investing every penny I could towards retirement. I maxed out my IRA and both the pre and post tax sections of my 401K. When I got raises my first thought was “How much of this can I put in retirement savings? I lived without it last year!”

      So all the best and I am glad you joined us. – Jay

  3. Barry B May 12, 2018 9:26 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 05/11/18.

    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

    Since we are near the end of Earnings Season, be sure to read Alan’s article,”Constructing Your Covered Call Portfolio During Earnings Season”. You can access it at:

    https://www.thebluecollarinvestor.com/constructing-your-covered-call-portfolio-during-earnings-season/

    Best,

    Barry and The BCI Team

    barry@thebluecollarinvestor.com

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