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Delta and covered call writing

Hitting a Double with News-Related Market Overreactions

Stock selection, option selection and position management are the 3 required skills for covered call writing and put-selling. One of our go-to exit strategies is “hitting a double” where we buy back the original option sold if share price declines and then re-sell that same option as share price recovers. Stock prices whipsaw and that […]

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Ask Alan

Ask Alan #144 – Evaluating a Covered Call Writing Portfolio

Alan answers a question posed by Carl, who asks: This is what I did for the first set of options trades. One stock, CMSCA, I already owned. Is there anything obviously right or wrong about what I have? Are the ROO premiums too low? Are the up potentials too low? Thanks for your help. Carl […]

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stock selection for covered call writing

Protecting Unrealized Profits When Share Price Accelerates

Covered call writing dilemmas can frequently result from positive circumstances. In August 2017, Vincent shared a trade he executed where an out-of-the-money strike was sold and share price had moved up significantly and was approaching the strike price. This means that Vincent realized an initial option premium return plus had an unrealized share appreciation component […]

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coverred call writing asnd technical analysis

Stocks Moving On and Off our Premium Stock List: A Technical Perspective

When we select stocks for covered call writing or selling cash-secured puts we factor in fundamental, technical and common-sense screens (like minimum trading volume). This screening process is the foundation of our Premium Stock Reports. Frequently we will notice stocks removed from these lists only to return shortly thereafter. The reason for these whipsaws are […]

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covered call writing exit strategies

Rolling Option Considerations: A Real-Life Example with BEAT

Exit Strategies for covered call writing is the third required skill for successful implementation of this strategy (stock selection and option selection are the first two). This is also known as position management. One of the most common situations we face each month is when the strike price we initially sold is expiring in-the-money (stock […]

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stop losses for covered call writing

Setting Stop Loss Orders for Covered Call Writing

After entering our covered call writing trades, we immediately go into position management mode. For most of us who started our stock investment careers buying and selling stock, this may include setting stop loss orders to mitigate losses when share price declines. For example, if we purchase a stock at $40.00, we may set a […]

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managing covered call trades

Managing Winning Trades for High Implied Volatility Stocks

Covered call writing and cash-secured put-selling are conservative strategies geared to retail investors who have capital preservative as a key strategy requirement. When we use high implied volatility underlying securities the strategy will have a broader range of risk-reward exposure. This article was inspired by Randy P. who had outstanding results using Applied Optoelectronics Inc. […]

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The Collar Strategy from a Delta Perspective

When covered call writing is combined with protective puts the strategy is known as the collar strategy. The short call places a ceiling on gains and the long put represents a floor protecting losses. The two option positions should result in a net credit. Typically, out-of-the-money calls and puts are selected. Covered call writing and […]

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covered call writing and earnings reports

Should Ex-Dividend Dates Be Treated the Same as Earnings Report Dates?

Covered call writers and put-sellers must be aware of earnings report dates and ex-dividend dates but for different reasons. A golden rule in the BCI methodology is never to sell an option if there is and earnings report date prior to contract expiration. In July 2017, Terry sent me an email asking if ex-dividend dates […]

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covered call writing and news events

Price Gaps and the Need for Exit Strategy Execution

Position management is one of the 3 required skills needed for covered call writing and put-selling. When share price gaps up or down there is a strong possibility that an exit strategy opportunity will present itself. There are times, however, when no action is the best action. On June 26th, 2017, Luis contacted me about […]

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