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Ask Alan 174 – Creating a Portfolio of Weekly Cash-Secured

Alan answers a question posed by Chevy, who asks:

I use your report to write (sell) weekly puts. I am currently using Square as an example. As an aside – I would love for you to explore this strategy in one of your Ask Alan series or otherwise. Thanks, Chevy

——— It’s the 2nd Wednesday of the month. Time for another original episode of Ask Alan. AA#174, “Creating a Portfolio of Weekly Cash-Secured Puts” 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.

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7 Responses to “Ask Alan 174 – Creating a Portfolio of Weekly Cash-Secured”

  1. Alan Ellman September 9, 2020 4:36 pm #

    Premium members:

    This week’s 4-page report of top-performing ETFs and analysis of the top-3 performing Select Sector SPDRs has been uploaded to your premium site. One and three-month analysis are included in the report. Weekly option and implied volatility stats are also incorporated.

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

    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. Yuqi September 10, 2020 1:32 am #

    Hi Allan,

    Thank you very much to provide this free resources about income generating option trading strategy. Much appreciated, and I am considering to be a member of your website. Two questions.

    1) Why is your website called “Blue Collar Investor”, rather than “White Collar Investor”? Blue Collar does not have much money left over for investing, but white collar does. Is that right?

    2) If one write both covered call and cash secured put option at ATM for stock AAPL. Do you think it is a good strategy to generate income? Why or Why not?

    Thank you very much,
    Yuqi

    • Alan Ellman September 10, 2020 6:25 am #

      Yuqi,

      1. My idea for the name “Blue Collar Investor” relates to my desire to provide resources to average retail investors. We do have a significant following from professionals and finance experts, and I do appreciate that, but my target is to assist average folks to self-invest and take control of our financial futures.

      2. The “moneyness” of a strike will vary from situation to situation. OTM is more aggressive, ITM is more defensive, ATM is better for sideways markets. It’s always better to reserve the flexibility to decide on which strike to choose based on current market conditions.

      When selling cash-secured puts in addition to covered calls, we must be willing to double our position in the underlying stock. I would prefer to select 1 strategy and focus on that approach or combine the 2 (PCP strategy) but 1 at a time. Some will sell covered calls and BUY a protective put (collar strategy). We can all do quite well keeping it simple.

      That said, I admire those who think outside the box.

      Keep up the good work.

      Alan

  3. Wes September 10, 2020 2:07 am #

    Dear Alan,

    In studying your Mid-Contract Unwind, you use the expression, “in the first half of a contract.”

    Why wouldn’t we do this at any time? It seems we have reached max gain.

    Thanks,
    Wes

    • Alan Ellman September 10, 2020 6:39 am #

      Wes,

      The MCU exit strategy is most applicable in the 1st half of a contract. This is a guideline. There are exceptions especially in volatile market conditions.

      Now, the reason MCU has application mainly in the 1st half of a contract relates to “Theta” or time-value erosion. Late in the contract, as time-value is declining precipitously, there are less opportunities to generate significant time-value premium to justify closing a max-return trade. If we can generate a return of 1% or more greater than the time-value cost-to-close, feel free to implement the MCU strategy at any time. We use the “Unwind Now” tab of the Elite and Elite-Plus Calculators to determine the time-value cost-to-close.

      Alan

  4. Hoyt T September 10, 2020 11:47 am #

    All,

    In the blog two doors down :), Terry posted a composite Chart of the SPX for election years. Over it was imposed this tears SPX YTD. Many of us found this extremely interesting.
    Many thanks to Terry!
    In in trying to find a post election year composite SPX chart I found an interactive SPX chart under each president since Hoover with the exception of Harry Truman. Why he was left out I don’t know.
    It’s a Composite of the S&P 500 by President from their election day. Many people will be surprised. I have always said I made more money under Bill Clinton’s presidency.

    https://www.macrotrends.net/2614/sp500-performance-by-president-from-election-date

    Facts are facts.

    Thanks again, Terry.

    Hoyt T

    • Hoyt T September 10, 2020 11:48 am #

      This years SPX YTD, not this tears SPX YTD.
      Sorry,
      Hoyt T

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