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Analyzing 4-Day and 2-Month Trades with XBI

Mario was generous in sharing his covered call writing trades with SPDR S&P Biotech ETF (NYSE: XBI). The trades were executed over a 2-month time-frame, the last of which was a 4-day Weekly option.   Mario’s trades with XBI 4/17/2019: Buy XBI at $84.95 4/17/2019 – 6/2019: Sell calls and “hit doubles” to lower cost-basis […]

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Ask Alan

Ask Alan #165 – Covered Call Writing with Strike Selection and Dividend Distributions

Alan answers a question posed by Mauricio, who asks: Alan,Hi Alan, What do you think about this strategy in a bear or volatile market environment? Sure, it does not protect against a massive stock loss but it does lower the total price of the shares. Cheers, Mauricio ——— It’s the 2nd Wednesday of the month. […]

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covered call writing trades

Combining In-The-Money Strikes and Stock Dividends to Provide Protection in Bear Markets + Holiday Discounts

When establishing our covered call writing trades, we must factor in current market conditions to either add protection in bear and volatile environments or to take advantage of normal to bull market scenarios. On May 17, 2019, Mauricio sent me a diagrammatic strategy proposal that would lower the breakeven using an in-the-money (ITM) strike as […]

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timing covered call trades

Timing Our Covered Call Trades: Lost Opportunity to Generate Cash with Facebook + Black Friday Discount through Monday

Our covered call options should be sold simultaneously with the purchase of our stocks. If we have evaluated a stock and have a bullish assessment for our covered call portfolio, we next check an option-chain to see if the initial time-value returns meet our goals ( for me, it’s 2% – 4% per month). By […]

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Making Money with Technology Stocks: Investing with QQQ

The exchange-traded fund (ETF) that has appeared most frequently in our premium member ETF reports is Invesco QQQ Trust (NASDAQ: QQQ). This fund consists of 100 of the largest non-financial companies (predominantly technology companies) that trade on the NASDAQ exchange. As of June 2019, the top 3 holdings in QQQ are Microsoft (MSFT), Amazon (AMZN) […]

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put-selling option chain

In-The-Money Cash-Secured Puts: Allow Exercise or Roll the Option When Using the PCP Strategy?

As contract expiration nears, we must be prepared how to manage our in-the-money (ITM) cash-secured puts. Assuming we initially sold an out-of-the-money (OTM) put which is now ITM, share price has declined. We can assume that by following the BCI guidelines for position management, the current stock price is not more than 3% below the […]

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Expiration Dates versus Expiration Times: Important Clarifications

When we sell covered call options or cash-secured puts, the expiration date of our monthly option contracts is usually the third Friday of the month at 4 PM ET. However, this is not to be confused with the expiration time of these contracts. The latter is the date and time when the contract is rendered […]

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covered call writing calculations

Selling Deep In-The-Money Calls to Exit Stock Positions

Covered call writing is used predominantly to generate cash flow in a low-risk manner. But it can also be used to exit stock positions while mitigating losses in those trades. As an example, I will use a series of trades shared with me by Ashvin on May 16th, 2019. The underlying security was iShares MSCI […]

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covered call writing and implied volatility

Implied Volatility and Expected Price Movement of our Stocks During the Life of a Contract

Implied volatility (IV) is directly related to the value of the premiums we receive when selling covered call and put options. The more volatile the underlying security, the greater the premium and risk exposure. I have written quite a bit about IV over the years and distinguished it from historical volatility (HV). This article will […]

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Delta and the moneyness of strikes

Delta as the Sole Criteria for Covered Call Writing Strike Selection

Strike selection is the second required skill when writing covered call options or selling cash-secured puts. Over the years I have been asked to suggest a specific Delta for strike selection implying that this statistic would be the sole criterion to determine strike determination. This article will make a case why Delta, although important, should […]

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