beginners corner
Archive by Author

The Significance of Breakeven When Constructing Our Poor Man’s Covered Call (PMCC) Trades: A Real-Life Example with International Business Machines Corp. (NYSE: IBM)

The PMCC Strategy involves buying LEAPS call options (expirations 1 – 2 years out) and selling short-term call options against the long position. The technical term is a long call diagonal debit spread. In our BCI methodology, the trade construction must meet a required trade initialization formula where the difference between the 2 strikes + […]

2 Comments Continue Reading →

BCI PODCAST 92: Selling Deep OTM Cash-Secured Puts to Create High-Probability Returns

Watch Video: Listen To Audio Version: Using weekly deep out-of-the-money cash-secured puts with Deltas of less than 10 can generate significant annualized returns with greater than 90% probability of success. This podcast uses a real-life example from one of Alan’s portfolios with Apple Computer that incorporates both initial structuring and exit strategy implementation. – – […]

Leave a comment Continue Reading →

Entering and Adjusting Our Covered Call Trades Using the BCI Trade Management Calculator: A Real-Life Example with WBA

Entering, managing and archiving our covered call writing and put-selling trades are critical to our overall success as well as allowing us to learn and benefit from our investment history. To demonstrate how to achieve a high level of organization and management of our trades, this article will highlight a real-life series of trades with […]

12 Comments Continue Reading →

20%/10% Guidelines: “Hitting a Double” in the Same Day: A Real-Life Example with Consumer Staples Select Sector SPDR (NYSE: XLP)

After entering our covered call writing trades, we immediately enter our 20%/10% BTC (buy-to-close), GTC (good-until-cancelled) limit orders. If and when these thresholds are reached (resulting from share price decline) are short calls will be closed (bought back). At that point, we can plan our next steps to mitigate losses or turn losses into gains. […]

21 Comments Continue Reading →
Ask Alan

Ask Alan 200: How to Avoid Early Exercise of Covered Call Options When Trying to Capture Dividends

Alan answers a question posed by Graham, who asks: Alan, I bought NRZ to sell covered call options and to capture a hefty dividend of 10% a year. Unfortunately, the option was exercised and I missed out on the dividend but did receive a nice premium. I’ve attached the trade specifics. Could I have avoided […]

Comments Off on Ask Alan 200: How to Avoid Early Exercise of Covered Call Options When Trying to Capture Dividends Continue Reading →

BCI PODCAST 91: Portfolio Overwriting Analyzed

Watch Video: Listen To Audio Version: When seeking to generate additional income by writing covered calls on long-term buy-and-hold securities, there is a specific approach we use for covered call writing. Strike selection and position management are specific to our strategy goals. This podcast uses a real-life example with Apple Computer to show strike selection […]

Comments Off on BCI PODCAST 91: Portfolio Overwriting Analyzed Continue Reading →

Why Did Option Value Decline After Stock Price Accelerated? A Real-Life Example with United Health Group Inc. (NYSE: UNH)

We, as covered call writers and sellers of cash-secured puts, are on the sell-side of options. Every so often, I receive interesting emails with educational value from members who buy options. On 4/21/2022, Kevin shared with a trade he executed with UNH where share value went higher after purchasing a call option, but the value […]

8 Comments Continue Reading →

Evaluating Pre- and Post-Market Opening Calculations; A Real-Life Example with The Simply Good Foods Company: (Nasdaq: SMPL)

Preparing for our initial covered call writing and cash-secured put trades starts pre-market. After developing a watchlist of eligible securities, we turn to the option-chains to determine if initial time-value returns align with our stated goals. Market-makers will be a bit hesitant to publish bid-ask spreads that are in our best interest until they can […]

8 Comments Continue Reading →

BCI PODCAST 90: Entering a Collar Trade

Watch Video: Listen To Audio Version: This podcast will detail the 3 legs of a collar trade and how to determine the best option strike prices to use. The calculations will be shown using the BCI Collar Calculator which will show maximum gain and loss. A real-life example with SLV will be used to bring […]

Comments Off on BCI PODCAST 90: Entering a Collar Trade Continue Reading →

How to Select the Best Covered Call Writing Strikes in Bear & Volatile Markets

Option selection is the 2nd of the 3 required skills for achieving the highest possible returns when writing covered calls or selling cash-secured puts. Option decisions include strike and expiration date choices. This article will focus in on strike selection for covered call writing in bear and volatile market where we take defensive positions that […]

9 Comments Continue Reading →