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Ask Alan #148: Why is this Great-performing Stock No Longer Eligible?

Alan answers a question posed by Dennis, who asks:

I’ve been doing great with MKSI since it was listed on our premium stock report. However, on the 11/10/17 report the stock was bumped off. Can you explain why and what action we should take if it is already in our portfolio.
Thanks a lot,
Dennis

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It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#148, “Why is this Great-performing Stock No Longer Eligible?”

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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.

8 Responses to “Ask Alan #148: Why is this Great-performing Stock No Longer Eligible?”

  1. Alan Ellman July 11, 2018 8:37 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. Alan Ellman July 11, 2018 8:41 pm #

    Discount for new book & calculators:

    The discount codes briefly expired today and have been extended:

    New book and 3 new calculators now available in the BCI store/ Discount coupons expiring soon

    Our new book, Covered Call Writing Alternative Strategies and the 3 new calculators associated with the 3 strategies highlighted in this book (Portfolio Overwriting, The Collar Strategy, The Poor Man’s Covered Call) are now available in the BCI store. We are offering early-order discount promo codes for the book and the 3-calculator package:

    newbook5: $5.00 off the price of the new book ($27.00 – $5.00 = $22.00). The book will cost $35.00 when available on Amazon.com.

    3calculators20: $20.00 of the price of the 3-calculator package ($79.00 – $20.00 = $59.00)

    To receive both discounts, place 2 separate orders.

    Link to BCI store: https://www.thebluecollarinvestor.com/store/

    The BCI team

  3. Joanna July 12, 2018 2:54 am #

    I have been thinking about selling cash secured puts but my concern is that it will cause confusion in regards to the individual strategies of each entity. (Covered calls vs CSputs)…suggestions?

    • Alan Ellman July 12, 2018 7:57 am #

      Joanna,

      This is such an important question. There is no doubt that mastering both strategies will allow us to take better advantage of all market conditions. In my humble opinion, covered call writing should be mastered first…all 3 required skills (stock selection, option selection and position management). The reason covered call writing is first is because it is more intuitive than put-selling and that is why it requires a lower level of trading approval from our brokerages.

      Once, we have mastered these 3 required skills for covered call writing, learning and mastering put-selling can be accomplished in a much smaller time frame.

      The formula for success (take your time):

      Education
      Paper-trade
      Generate cash flow for years and decades

      Alan

    • Jay July 12, 2018 11:27 am #

      Hi Joanna,

      Your point about the potential confusion having different options positions open simultaneously on the same underlying is well stated – I once felt that way often.

      The way I made sense of it was to remember my goal in each different trade on the same position. I’ll share, if I may, a real time example from my IRA on QQQ, a core holding.

      For July and August expiry’s I have 4 different things going on with QQQ: holding shares uncovered, sold CC’s, sold CSP’s and a small speculative call spread. My thinking was: the uncovered shares are for simple appreciation in a low premium environment. The CC’s are for some loss protection/cash flow. The CSP’s are to add to the position at a lower cost basis than just buying today. The call spread is pure speculation since options are cheap at the moment.

      All of this can work in harmony plus it is a great hobby :).- Jay

  4. Alan Ellman July 12, 2018 7:59 am #

    New seminar just added:

    Long Island Stock Trader’s Meetup Group

    Tuesday May 14, 2019

    7 PM – 9 PM

    Plainview- Old Bethpage Public Library

    “Using Call Options to Generate Cash and Put Options to Protect Cash”

    Co-presenters: Alan and Barry

  5. Bob July 12, 2018 7:41 pm #

    Hi Dr. Ellman

    I just completed reading your two books

    (1) Cashing in on Covered Calls (2) Selling Cash Secured Puts

    I find it interesting that in your books you “almost” avoid talking about capturing Dividends
    As you know Dividend Paying Stocks goes down the amount of the Dividend on Ex Dividend day
    I do not like that because,
    I get the Dividend then find that the stock has dropped by the same amount so what is the advantage?

    I find myself questioning, why not avoid Dividend payers (at least over the Ex Dividend date) and concentrate only on revenue from
    Covered Calls & Cash Secured Puts using good quality stocks ( I would have no problem finding Good Quality Companies)

    For example I like the Canadian Banks for the Dividends
    Royal Bank pays .96 per quarter (average of .32 a month)

    I could easily find “other companies ” that over a period of 30 days or less that would pay me more than .32 in premiums

    So I am caught between a rock and a hard place
    Do I try to capture the Dividend then work to get even on the stock price
    or
    Do I find “quality stocks” that may not pay a dividend but will reward me with better premiums by Selling Covered Calls or Cash Secured Puts
    I would appreciate your thoughts on this
    Note- I am “NOT” asking for investment advice

    Many Thanks
    Bob

    • Alan Ellman July 13, 2018 6:32 am #

      Bob,

      I view dividend capture as it relates to traditional covered call writing as a non-event. It represents potential “icing on the cake” as opposed to a selection requirement. We must focus like a laser on selecting the best underlyings based on fundamental analysis, technical analysis and common sense principles.

      That said, we do not have to “make up” for share loss because the amount of share decline is compensated for by the capture of the dividend. If the underlying is an elite-performer and if the option returns meet our goals, the stock should be considered for our option-selling portfolios, with or without dividends.

      For those who want to retain the shares (possible tax reasons), ex-dividend dates must be factored in as this is the main reason for early exercise.

      If tax issues are not a factor, early exercise can actually be a plus as we will have maximized our returns and now have the cash back to use to initiate a second income stream in the same contract month with the same cash.

      To sum up: Covered call writing is one strategy; dividend capture is another. Combining them may weaken our focus and detract from potential returns. For those who like both strategies, setting up 2 separate portfolios, one geared to each strategy, may be a better choice.

      Alan

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