When selling covered call and put options we must first establish our initial time value return goals. We also should factor in upside potential when writing out-of-the-money call options and downside protection of those time value returns in bear and volatile markets. Do we accomplish these parameters based on our total portfolio returns or on […]
Buying Low and Selling High Also Applies to Option-Selling
Covered call writers hold two positions. We are long (own) the stock and short (sold) the call option. It is intuitive to investors that it is to our advantage if the stock price accelerates or at least does not decline in value. There are five possible outcomes in the stock portion of our trade: Stock […]
Ask Alan #150: Comparing Index Options and Stock Options
Alan answers a question posed by Jordan, who asks: I am soaking in all the information on your impressive website. One area I am not clear on is the difference between stock options, which you appear to favor, and index options which I would think can be used for broader diversification. Can you explain the […]
Compounding Our Option-Selling Profits To The Highest Levels
Covered call writing and selling cash-secured puts are cash-generating strategies. These profits can be impressive as isolated events but what if we then take these proceeds and re-invest them to amplify our returns? The BCI philosophical approach to option-selling stresses the importance of re-investing our short-term premium returns whenever possible. Of course, for many of […]
Rolling Out-And-Up And Then Stock Price Declines
Rolling our covered call trades involves multiple months of trading statistics. The calculations may be deceiving initially but on deeper analysis, rolling our options can represent an invaluable trading tool which enhances our overall returns. Some of our members have expressed concern when rolling out-and-up because the cost-to-close our near-month in-the-money call deducts the intrinsic […]
Early Exercise Due to Dividend Capture: Theoretical and Practical Applications
When we write a covered call option we are obligated to sell our shares at any time from the option sale to contract expiration if the option buyer decides to take possession of our shares. This is because we are dealing with American Style options. European Style options (apply mainly to indexes, not stocks) can […]
Factors to Consider When Closing a Trade Early: A Real-Life Example with ATVI
Exit strategies for covered call writing includes closing a trade when share price rises above the original strike price sold. When formulating these decisions, we must factor in the cost-to-close as it relates to the opportunity to generate more profit. On November 8, 2017, Marion shared with me a trade with Activision Blizzard, Inc. (NASDAQ: […]
Position Management in the Final Week of a Contract: A Real-Life Example with FIVE
Exit strategy preparation and implementation is one of the 3 required skills for successful covered call writing and put-selling. Because of the time value erosion of our options (Theta), there are limitations regarding the exit strategy opportunities as our contracts near expiration. In January 2018, Duminda contacted me about a trade he executed with Five […]
Evaluating the Success of our Covered Call Trades
Whenever a covered call trade results in a maximum return, it is a successful trade…period…end of story. To most, this statement appears nonsensical and self-evident. But I’m here to tell you that there are a lot of covered call writers that question that success. In late December 2017, Paul shared with me a series of […]
Understanding the Impact Implied Volatility has on Delta
For covered call writers and put-sellers, the option Greeks play a major role in our understanding of the risks and value of our option premiums. We know our option premiums consist of intrinsic value (for in-the-money strikes) + time value. Our initial time value returns reflect the time to expiration + the volatility of the […]
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Establishing Our Option-Selling Goals: Total Portfolio Versus Individual Stock Perspectives
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Buying Low and Selling High Also Applies to Option-Selling
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Ask Alan #150: Comparing Index Options and Stock Options
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Compounding Our Option-Selling Profits To The Highest Levels
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Rolling Out-And-Up And Then Stock Price Declines
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The New Stock Market- Algorithmic and High Speed Trading
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Options That Expire Weekly and Conventional Expiration Cycles
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Why the 3% Guideline Applies to Puts but Not to Call Options
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Earnings Pre-Announcements Explained and Categorized
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Tax Implications of Writing Covered Calls against Long-Term Holdings
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MarioG Trading Experiences Hoyt, Thanks for the c
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Roni Thanks Mario
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