Whether we are using covered call writing, put-selling or any other investment strategy, investor interpretation of results is an interesting topic to analyze. Is the glass half-full or half-empty? On October 5th, 2018, Gene wrote me about two covered call positions he was holding and expressed deep concern over the status of those trades. This […]
Strike Price Selection When Selling Cash-Secured Puts: A Real-Life Example with WWE
Strike price selection is one of the 3-required skills when selling covered calls or cash-secured puts. This article will highlight the choices and rationale for our decisions when selling puts for World Wrestling Entertainment, Inc. (NYSE: WWE) on 9/24/2018. Bullish price chart for WWE Option-selling lowers our cost-basis and therefore we make […]
VIX Covered Call Writing: Selling Options Against Market Volatility
Traditional covered call writing involves first buying a stock (or exchange-traded fund) and then selling a corresponding call option. The result of the initial trade is to generate cash flow from the option sale and lower our cost basis on the stock side. Based on member feedback, there has been a growing interest in writing […]
Treasury Bond Yields and the Stock Market
Treasury bond yields are followed by stock investors and changes in yield can impact the success of our trades. In particular, the 10-year treasury yield is used as a yardstick for critical financial issues like mortgages. What is bond yield? This is the interest rate paid by the US government for borrowing money when […]
Trade Management: A Real-Life Example with Brooks Automation, Inc. (NASDAQ: BRKS)
Once we enter our covered call writing trades, we immediately go into position management mode. In August, 2018, Mike generously shared with me a series of trades he executed using Brooks Automation, Inc and asked for my evaluation of his management of these trades. This article will detail and evaluate each aspect of the series […]
Volatility Skews: Defined, Explained and Updated
Implied volatility is a key concept for covered call writers and put-sellers. It is a forecast of the underlying stock’s volatility as implied by option prices in the marketplace. In 2012, I published an article relating to implied volatility where volatility skew was discussed. Volatility skew as defined in my 2012 article The volatility […]
Timing Our Covered Call Trades: Joanna’s Tale of “DOH”
When entering our covered call trades with new positions, we buy the stock and immediately sell the option. This can be accomplished by legging-in or using a buy-write combination form. This is an important guideline because we will be assured of capturing our initial time value return goals. On August 6th, 2018, Joanna shared with […]
Managing News-Driven Gap-Downs: A Real-Life Example with Stamp.Com
Earnings reports represent the greatest risk for price gap-downs for our covered call writing and put-selling stocks. Problem solved…we avoid earnings reports. However, from time-to-time unexpected negative news will be reported that will cause significant price decline. On July 25th, 2018, Earl shared with me a trade he initiated with Stamps.com (NASDAQ: STMP) and was […]
Converting Non-Dividend Stocks Into Dividend Stocks
Generating a consistent cash flow from stock dividends is an appealing benefit from owning shares for many investors. Stock ownership, in these scenarios, can create two income streams, one from price appreciation and the other from quarterly dividends. However, not all securities have associated dividends and some investors will bypass these stocks even if they […]
Why Covered Call Writing Outperforms the Overall Market
Why should we spend the time to educate ourselves on how to implement and manage covered call writing trades? The answer is simple: Once the 3 required skills (stock selection, option selection and position management) are mastered, we will put ourselves in a position to beat the market on a consistent basis. This article will […]
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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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Alan Ellman David, It's quite rare that I am not fully
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Barry B Premium Members, This week’s Weekly Stock Scr
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David Alan, Quick question. I've been learning a
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