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 […]
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 […]
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 […]
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 […]
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 […]
New Broker Rule: The Labor Department’s Fiduciary Rule for Retirement Accounts
A key mission statement of The Blue Collar Investor is to “become CEO of your own money” A new rule issued by the US Department of Labor highlights why this is so important. In the past, stock brokers were not required to put the best interest of their clients ahead of their own. This is in […]
Leveraged ETFs and Margin Accounts for High-Risk Traders Only
Covered call writing results can be enhanced through the use of leveraged ETFs and margin accounts. However, so too is the risk elevated. In this article, the pros and cons of these strategies are examined. Definitions Leveraged ETF: An exchange-traded fund (ETF) that uses financial derivatives and debt to magnify the returns of an underlying index. Margin account: […]
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 […]
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 […]
Protective Puts: Selecting the Best Strike Price
Covered call writing involves buying a stock and selling a call option. When a put is also purchased to avoid significant downside loss, it is referred to as a protective put and the strategy as a whole is referred to as a collar. When a put option is purchased on the same day that a stock is purchased, […]
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Interpreting Exit Strategy Calculations Versus Final Calculations
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Ask Alan #160 – Comparing Protective Puts and Position Unwinding as Strike Moves Deep In-The-Money
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Covered Call Writing with a Biotech Company: A Real-Life Example with Argenx (NASDAQ: ARGX)
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In-The-Money Covered Calls: Intrinsic Value Protects Time Value: A Real-Life Example with TEAM + New Tool Coming Soon
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Structuring a Poor Man’s Covered Call Trade with The Coca-Cola Company
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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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Mariog Trading Experiences - 7/18/19 Jack, Section
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Jay Hey friends, To the extent seasonality plays an
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Alan Ellman Premium members: This week's 8-page repo
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Jack Alan, 1) I have kept scrupulous records and bel
