In bear and volatile markets, our cash-secured put trades (covered calls too) should be structured in a defensive manner. Greater protection to the downside typically means lower returns. That’s the tradeoff. We may opt for weekly trades which frequently result in higher annualized returns. What if we are in a holiday-shortened week, creating 4-day trades? Can we still generate significant premium returns with elite-performing underlying securities? In this article, a real-life example with Agnico Eagle Mines Limited (Nasdaq: AEM) will be examined to show that, yes, this is frequently possible. This trade (10 contracts) was taken directly from one of Alan’s portfolios.
AEM from our BCI Premium Stock Screen & Watch List
- AEM: $117.06
- #7 on IBD 50
- 1.20% dividend yield
- Ex-dividend date 2/28/2025
- Robust implied volatility (IV): 64.40%
- Industry segment rank: A (Mining)
- Next ER: 4/24/2025
- Bullish On Balance Volume (OBV)
- Analyst rating (MAR) a stellar 1.56
- Weekly options not available
- On our premium watch list for 4 weeks
- The $110.00 4/17/2025 deep OTM put strike has a bid price of $0.55
4-day initial calculations using the BCI Trade Management Calculator (TMC)
- The initial 4-day (Good Friday holiday) option return is significant (0.50%, 45.85% annualized- brown cells)
- If share value drops below the $110.00 strike price, and no exit strategy intervention is taken, shares are purchased at the breakeven strike price ($109.45 yellow cell), a 6.50% discount (purple cell) from share price when the trade was executed
Broker confirmation of AEM put sales including commissions
A credit of $293.35 was added to the cash account.
Final trade results
On Thursday 4/17/2025 (expiration Thursday), AEM closed well above the $110.00 put strike. The 0.50% 4-day trade, 45.85% annualized trade was realized.
Discussion
Using a well-thought-out screening process to generate a watchlist of elite-performing securities, will allow us to both take defensive postures with our trades while also allowing for significant returns. As always, we must be prepared to use our exit strategies if and when those opportunities arise.
Covered Call Writing Alternative Strategies
Portfolio Overwriting- using stocks in buy-and-hold portfolios
The Collar Strategy- using protective puts
The Poor Man’s Covered Call- using LEAPS options
———-
Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies.
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:
Hello Alan,
Upcoming events
1.Mad Hedge Investor Summit
Tuesday September 9, 2025
11 AM ET
Details to follow.
2. BCI Educational Series Webinar # 8: New Credit Spread Calculator
Thursday September 18,2025
8 PM ET – 9:30 PM ET
Over the past 2 years, BCI has been developing and beta-testing a 1-of-a-kind spreadsheet for entering and adjusting our credit spread trades. Like our Trade Management Calculator (TMC), our goal was to make it the industry standard. Only you can decide if we accomplished our mission.
Alan & Barry will introduce this product, review all the tabs inherent in the spreadsheet and demonstrate how to use it. A 1-time early order discount will also be offered.
For those who trade, or are interested in learning how to trade, credit spreads, this is a must-see webinar.
Click here to register for free.
3. Orlando Money Show
Orlando Resort @ ChampionsGate
October 16 – 18, 2025
- Opening ceremony keynote address
- 45-minute workshop class: Traditional & Low-Risk Covered Call & Cash-Secured Put Trades
Details and registration link to follow.
4. Money Masters Symposium Sarasota Florida
December 1 – 3,2025
Setting Up Option Portfolios Using Stock Selection, Diversification, Cash Allocation and Calculations
Analysis of 6 covered call writing trades
Minimize risk and maximize returns. These are our 2 main goals when crafting our option portfolios. There are several factors we can utilize which will put ourselves in an outstanding position to achieve these objectives. Here is a summary of those factors which will be addressed during this presentation:
- Select elite-performing stocks and ETFs
- Diversity stock positions as well as their industries
- Allocate a similar amount of cash per-position
- Ensure that initial calculations align with strategy goals and personal risk-tolerance
- Once trades are entered, go into position management mode- be prepared for exit strategy opportunities
Registration link to follow.
Premium members:
This week’s 4-page report of top-performing ETFs, along with our sample trade of the week, has been uploaded to your premium site. The Select Sector SPDR section is now crafted to align with our streamlined (CEO) approach to covered call writing. The report also lists Top-performing ETFs with Weekly options, mid-week market tone as well as the implied volatility of all eligible candidates.
We have also included a sample trade taken from one of our BCI watchlists.
Premium member video link:
https://youtu.be/EXMO-KwZuJs
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
Premium Members,
This week’s Weekly Stock Screen and Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 08/22/25.
Please note: The Weekly Report for next week will be uploaded late on Sunday, August 31, 2025.
Be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them on The Blue Collar YouTube Channel. For your convenience, the link to the BCI YouTube Channel is:
https://www.youtube.com/user/BlueCollarInvestor
Barry and The Blue Collar Investor Team
Alan,
Hope all is well.
I forget what your advice is for calls / puts out a month at what % to buy to close.
In other words on 9/19 call expiration date if I look at my current call holdings my acct shows what % I might be up or down of the premium received.
What % then would you advocate closing and taking profit at this time? I guess the same question might be for calls out 2 months should I take profit at this time?
thanks,
James P.
James,
Taking a profit prior to contract expiration is a strategy we will be highlighting during our September 18th webinar regarding credit spreads.
As far as our covered call trades are concerned, we consider closing both legs of the trades when the time-value cost-to-close (TV CTC) approaches $0.00 (it rarely actually ever reaches $0.00) and we can generate at least 1% more than that time-value cost-to-close with a new position by that same expiration date.
We can use the “Unwind Now” worksheet tab of our Trade Management Calculator (TMC) to get the TV CTC. Let’s say it’s 0.5%. If we can generate at least 1 1/2%of initial time-value profit with a new position with the same expiration date, we can consider taking profit with the original trade.
I we can’t, leave the trade as is and continue monitoring.
BTW: I rarely, if ever, go out 2 months.
A profitable trade is a good problem to have and kudos to you for analyzing the next steps to take, if any.
Alan
HI Alan,
Joined the BCI community late last year and have learned a ton since that time. I’ve read most of your books and have watched countless online videos.
Every Sunday (I’m trading only weekly options) I sit down and map out my planned Monday trades in the Trade Management Calculator. I’ll input any stocks that I kept from the prior week and also add new stocks / ETFs to buy on Monday from your weekly report.
I’ve heard you say before that a reasonable goal is 0.5% to 1% per week – at this time I’m only trading weeklies as I like the idea of being somewhat out of the market over the weekend.
For this week, I’ve got a couple of stocks in here where I’ve got big gains so I’m doing your suggested portfolio overwriting on those and using deltas below 0.2 so that the stocks are unlikely to go. That’s a part of why my upside return looks high – and my ROO % would be over 1% if I pulled out those portfolio overwriting percentages.
I’m doing a blend of in-the money, at the money, and out of the money strikes. If you are doing a similar exercise and you see the ROO of 0.93% what do you typically do? Go back and lean more defensive and bring that number down a little to something more like 0.75% which is more in the middle of the 0.5% to 1% target range? Just curious to get an idea of how you think about these sorts of things when selecting strike prices.
Also – a suggestion – would you consider doing an exit strategy video focusing on weekly options? I’ve read your book and a lot of the online content, but what I’ve found seems to be more geared towards monthlies – and of course with monthlies there’s a lot more time to utilize an exit strategy.
I’m struggling with the weeklies as with only 5 trading days I’m mostly ending up with “Allowing Exercise” or “Expire Worthless” on my trades. Rarely am I using an exit strategy. I think it would be extremely helpful to get an understanding of how you think about exit strategies changes when doing only weeklies vs monthlies.
Appreciate all the education – wish I had learned about this when I was younger! I’ve been a buy and hold investor my entire life, but now that I recently retired I have more time to be an active option investor.
Andrew
Andrew,
You’re doing great … impressive.
My responses:
1. Make sure you are using current market value when retaining shares from a previous contract cycle, not the price you paid for the stock. The previous share appreciation (or decline) has been accounted for in the TMC in the previous expiration cycle, by entering the unsold $ of the stock at expiration, in the adjustment section of the spreadsheet.
2. A ROO of 0.93%/week does fall into our guideline range for weekly expirations. If bullish, it is fine. If we are using ITM calls and plan to be more defensive and prefer to be even. more defensive, use a strike deeper ITM and settle for a lower time-value ROO.
3. I have made a note on my to-do list to create a video or blog article or both for weekly exit strategies. For now, keep the 10% BTC/GTC limit orders in place and keep an eye out for rolling-down and mid-contract unwind (MCU) exit strategy opportunities.
Alan
Hi Alan,
A quick question. I am scaling my portfolio now and have around 140.000 euro in it. Also own some properties and gold and silver as a back up.
I came across your 7% guideline. How i interpret it: when you buy a stock, for example for 100, you put your stop-loss at 93.
When the stock goes up, i think i adjust this percentage? Like for example once a week?
What about the mining stocks since they have greater pullbacks. Is it a save concern for protection and for upside potential to put this stop-loss around 88% of the current price level and adjust it?
Concerning the puts i am writing as well: The 3% rule seems like a good one but in times of a severe correction volatility will go up and buying the put back will be very costly?
For extra protection i bought the Spy dec19 630 put. Also to cover the gap of the 7% in case of a downside scenario. I know it cost me money but insurance always does?
Do i miss something or do you have more tips to cover this scenario? Any thoughts?
Kind regards and curious on your thoughts,
Bas
Bas,
The 7% guideline applies to covered call trades when the 20%/10% thresholds have not been breached.
If you are alluding to stock-only scenarios, check with your broker and inquire if they provide “trailing stop-loss orders”. This is an automatic order to sell shares when the price drops a certain % (typically 7-10%) below its highest price. This means that you will not need to constantly adjust the sell order on an apprciating stock.
The 3% guideline for cash-secured puts is a defensive exit strategy to protect against catastrophic losses. Yes, there will be losses, but small ones. To be even more defensive, close the put sale when the breakeven price point is breached.
My personal preference is to use the 3% guideline for monthly trades and consider the BE price point for weekly trades.
Alan