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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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covered call writing calculations

Mitigating Losses After a Disappointing Earnings Pre-Announcement

A critical BCI rule for covered call writing is never to sell an option if there is an upcoming earnings report prior to contract expiration. Earnings reports are risky events we want to avoid. From time-to-time a company will pre-announce earnings especially if there will be a negative story to tell its shareholders when the […]

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Ask Alan

Ask Alan #140 – “Holding a Stock Through an Earnings Report”

Alan answers a question posed by Frank, who asks: Broadcom (AVGO) has been on a tear since January and I plan to hold it through next week’s earnings report (6/1 after market closes). Would it make sense to write a covered call after the report passes for the June contract or wait for the start […]

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Theta and covered call writing

Executing Trades Based on Ex-Dividend Dates

Early assignment of our covered call positions is rare but possible. When it does occur, it is frequently related to an ex-dividend date. These are dates that we must own the shares in order to be eligible to receive the dividend on the distribution date. Premium members can access ex-dates of the eligible stocks in […]

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Rolling Out-And-Up in Our Buy-And-Hold Portfolios

Portfolio overwriting is a covered call writing-like strategy where we sell call options against long-term buy-and-hold securities. Generally, these are low-cost basis stocks that are dividend-bearing and trading in non-sheltered accounts. We want to leverage these stocks and exchange-traded funds (ETFs) to generate additional income but also want to avoid assignment of the shares to […]

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Pros and Cons of Covered Call Writing: Calculation Perspective

Every investment strategy, including covered call writing and selling cash-secured puts, has advantages and disadvantages. When we decide to implement a plan, it is with the understanding that we accept and embrace these pros and cons. It is not productive to look back and say we could have made more money using a different approach. […]

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tax considerations for covered call writing

Long-Term Capital Gains Enhanced with Covered Call Writing

Covered call writing can be crafted to meet a multitude of trading styles, goals and personal risk tolerances. In this article, I will highlight yet another situation where we may utilize this great strategy. In this common hypothetical, we are preparing to sell a stock that has substantially appreciated in value and represents a source […]

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covered call writing and earnings reports

Earnings Reports and Rolling Options

When we sell a covered call and share price rises dramatically, there is a tendency to roll up in order to capture additional future share appreciation. The most common reason for a gap-up in price is a favorable earnings report. In mid-May 2017 Tim wrote me about a series of trades he executed that involved […]

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covered cal;l writing and dividends

Why Would a Call Buyer Exercise, Rather than Sell, an In-The-Money Call Option?

When we write a covered call, there is a trader or market-maker buying that call on the other side of the trade. We know that as expiration approaches, the time value of options tends to approach zero (Theta effect). With that in mind I received an email from Marcos in early May 2017 astutely asking […]

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