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Ask Alan #173 – Rolling Out Of The Money Strikes Early in The Contract


Alan answers a question posed by Lisa, who asks:

Alan, I am trying to figure out how to use the What Now tab and wonder if you can assist me with the following situation. I (fake) bought Shopify (SHOP) on Monday for $466.50 at a strike of 500 for a bid of $13.40. Today, the stock has risen to $475.64 with an Ask buy back price of $17.45. I was thinking possibly to roll-out or roll-out-and-up and was trying to understand the calculations within the What Now tab of The Ellman Calculator. If I wanted to roll out, using the same strike of 500 and same date of call, Feb 21, in an attempt to Hit a Double and the spreadsheet shows minimal gain or a loss. Can you kindly advise me what I’m doing wrong? Thanks! Lisa

——— It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#173, “ Rolling Out-Of-The-Money Strikes Early in The Contract” If you want more “Ask Alan” videos, you can! Become a premium member today, and tune in to the educational power of the complete library!



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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.

6 Responses to “Ask Alan #173 – Rolling Out Of The Money Strikes Early in The Contract”

  1. Alan Ellman August 12, 2020 5:36 pm #

    Premium members:

    This week’s 4-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. Mid-week market tone is also included on page 1.

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

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    Alan and the BCI team

  2. Alan Ellman August 13, 2020 8:33 am #

    Tonight’s free webinar login:

    Topic: Using Dividends, Stocks and Stock Options to Create a 3-Income Stream Trading Strategy.

    You can attend the webinar LIVE using the ZOOM app and plugging in the Meeting ID 933 8656 0621 at sign in, or by clicking the link shared below in the “ZOOM LOGIN INFORMATION” section of this email. If you prefer to listen to the event, feel free to dial in live, by phone, using one of the #s listed below.

    BONUS – A coupon code will be announced during the event offering a discount towards the purchase of any/all BCI products.

    If you haven’t seen the webinar intro video on the BCI YouTube channel, you are welcome to watch it here:

    https://youtu.be/U-kSYSf0KZM

    FREE WEBINAR: Using Stock Dividends and Option-Premium to Generate a 3-Income Stream Strategy

    The video runs 6:12 minutes and should give you a preview of what to expect in the 2 hour webinar.

    Make a night of it. Share this email with your family and friends and watch together in the community format Zoom is famous for.
    All welcome.

    See you later!
    Alan

    ~~~ – – – ~~~
    ZOOM LOGIN INFORMATION

    Alan Ellman is inviting you to a scheduled Zoom meeting.

    Topic: FREE WEBINAR Hosted by The Blue Collar Investor
    Time: Aug 13, 2020 08:00 PM Eastern Time (US and Canada)

    Join Zoom Meeting
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  3. Steve H August 13, 2020 9:13 am #

    Hi Alan,

    Hope you’re doing well!

    This past week with a pullback, a few of my calls were triggered using the 10% rule. Happened to three of them and the fundamentals were mixed.

    I should have been more patient and allowed the stock to do what it needed to. Instead I was more conservative and didn’t wait long enough. In other words, I sold another call at or near the my and now I’m watching the stock go back up.

    It appears I might miss out on a couple of potential doubles because I was impatient. I’m guessing if the fundamentals are mixed to bullish, I shouldn’t feel guilty about letting the stock sit there without a call and place correct? But with August 21st coming up to us next week, I felt the need to try to get some more premium while I still could.

    In hindsight I should have just waited a little longer or maybe went for the next month expiration date. Feel like I get caught in limbo when my calls are triggered with the 10% rule and the stock is sitting there by itself.

    Generally speaking with one week left, do you wait it out or sometimes just go for it the following expiration date to collect premium.

    Thanks in advance,
    Steve

    • Alan Ellman August 13, 2020 11:46 am #

      Steve,

      You should be feeling proud of yourself, not beating yourself up.

      Generally speaking, in the BCI methodology we do favor rolling-down over looking to “hit a double” in the latter part of a contract. I would have taken the same action you did.

      The lesson we can take away from this experience is that we would all look smarter in hindsight.

      Keep up the good work.

      Alan

      • Steve H August 13, 2020 11:51 am #

        Thanks for the feedback Alan!

  4. Alan Ellman August 14, 2020 10:00 am #

    LINK TO RECORDING OF YESTERDAY’S WEBINAR:

    https://youtu.be/3eQa9BpqLhY

    Thank you for your incredible support… hundreds of you attended….

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