beginners corner
Archive | Exchange-Traded Funds RSS feed for this section
covered call writing and implied volatility

Implied Volatility and Expected Price Movement of our Stocks During the Life of a Contract

Implied volatility (IV) is directly related to the value of the premiums we receive when selling covered call and put options. The more volatile the underlying security, the greater the premium and risk exposure. I have written quite a bit about IV over the years and distinguished it from historical volatility (HV). This article will […]

47 Comments Continue Reading →
covered call writing with VIX

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 […]

22 Comments Continue Reading →
covered call writing calculations

Covered Call Writing with Only One Security

Diversification is one of the key common-sense requirements when selling covered calls or cash-secured puts. When using individual stocks, the BCI guidelines are a minimum requirement of 5 different stocks in 5 different industries where any one position cannot represent more than 20% of our entire portfolio.  We can use fewer securities when using exchange-traded […]

22 Comments Continue Reading →
bear market strategies

Inverse Exchange-Traded Funds versus Shorting Stocks

In bear markets, one of the tools we can benefit from with our covered call writing and put-selling strategies is inverse exchange-traded funds (ETFs). An inverse ETF is also known as a short ETF or a bear ETF. These securities are constructed to return the exact opposite performance of a certain benchmark or index. Many […]

19 Comments Continue Reading →
volatility-based ETNs

Market Volatility and VIX-Based Exchange-Traded Notes

Our covered call writing and put-selling portfolios have been significantly impacted the past few weeks from extreme market volatility. In addition to rising wages, inflation concerns and projected interest rate hikes, volatility based exchange-traded notes are also playing a role in the market decline.    What is the VIX? The VIX is also known as […]

26 Comments Continue Reading →
covered call writing strategies

ETF Index Tracker Proposed Strategy: A Risk-Free Investment?

Using covered call writing and exchange-traded funds (ETFs) is a viable approach to generating monthly cash flow. I personally use this strategy in my mother’s portfolio. Can this investment style be expanded to include inverse ETFs to move this expanded path to a near risk-free system? In April 2017, Rushbabh, a member from Australia, was kind enough […]

43 Comments Continue Reading →
covered call writing and earnings reports

Locating Stocks During the Heart of Earnings Season

Never write a covered call or sell a cash-secured put when there is an upcoming earnings report prior to contract expiration. This is one of the most important rules in the BCI methodology. Adhering to this guideline can create challenges during the heart of earnings season when most companies publicize their financial statements. In our BCI […]

22 Comments Continue Reading →
selling cash-secured puts in bear markets

Exchange-Traded Fund Option-Selling in Bear Markets

Covered call writing and put-selling can be used in most market conditions including bear markets. In my books and DVDs, I detail the use of in-the-money call options (strikes lower than current market value), out-of-the-money put options (also lower than current market value) and securities with low-implied volatility like exchange-traded funds (ETFs). In this article […]

34 Comments Continue Reading →