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technical analysis

An Annualized Return of 5000% and Feeling Miserable: Interpreting Our Covered Call Trades

Whether we are using covered call writing, put-selling or any other investment strategy, investor interpretation of results is an interesting topic to analyze. Is the glass half-full or half-empty? On October 5th, 2018, Gene wrote me about two covered call positions he was holding and expressed deep concern over the status of those trades. This […]

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covered call writing trade management

Trade Management: A Real-Life Example with Brooks Automation, Inc. (NASDAQ: BRKS)

Once we enter our covered call writing trades, we immediately go into position management mode. In August, 2018, Mike generously shared with me a series of trades he executed using Brooks Automation, Inc and asked for my evaluation of his management of these trades. This article will detail and evaluate each aspect of the series […]

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covered call writing trades

Timing Our Covered Call Trades: Joanna’s Tale of “DOH”

When entering our covered call trades with new positions, we buy the stock and immediately sell the option. This can be accomplished by legging-in or using a buy-write combination form. This is an important guideline because we will be assured of capturing our initial time value return goals. On August 6th, 2018, Joanna shared with […]

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technical analysis and covered call writing

Managing News-Driven Gap-Downs: A Real-Life Example with Stamp.Com

Earnings reports represent the greatest risk for price gap-downs for our covered call writing and put-selling stocks. Problem solved…we avoid earnings reports. However, from time-to-time unexpected negative news will be reported that will cause significant price decline. On July 25th, 2018, Earl shared with me a trade he initiated with Stamps.com (NASDAQ: STMP) and was […]

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covered call writing exit strategies

“Hitting a Double” Calculations with The Ellman Calculator

One of the BCI exit strategies that helps distinguish us from all other covered call writers is known as “hitting a double” We use this position management technique when share value declines such that option value drops to 20% (in the first half of a monthly contract) or 10% (in the second half of a […]

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covered call writing exit strategies

Understanding the “Paid-Up” Risk When Rolling Out-And-Up: A Real-Life Example with FIVE

One of our covered call writing exit strategies when the strike is in-the-money on expiration Friday is rolling out-and-up. This is when we buy back the near-month call (buy-to-close) and sell the next month’s higher strike. There are times when share appreciation has dramatically increased above the near-month strike price such that buying back the […]

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exit strategies for covered call writing

“Hitting a Double” Using a Lower Strike Price

One of the exit strategies for covered call writing that allows us to enhance portfolio returns is known in the BCI community as “hitting a double”. We implement this position management technique when option value meets our 20%/10% guidelines. The initial short call is closed (buy-to-close) as share value declines early to mid-contract and then […]

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technical analysis for covered call writing

Multi-Leg Option Trades: Understanding Calculations and Results

Covered call writing involves a minimum of 2 legs: we are long the stock (own the stock) and short the option (sold the option). There are many times when we employ the position management skill and options are bought back and new options sold or our underlyings are sold. This adds additional legs to the […]

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technical analysis for covered call writing

Price Charts Tell a Story and Provide Guidance in Formulating Our Investment Strategies

Technical analysis is one of the critical tools available to us in selecting the best stocks for our option-selling strategies. Price charts are much more than a sequence of dots and lines…they tell a story about a company which, with proper research, ultimately leads to a series of rules and guidelines that will assist in […]

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covered call writing option

Increasing Capital Gains When Selling Stock: Another Use for Covered call Writing

Covered call writing is a low-risk option-selling strategy typically used to generate monthly cash flow. When we capture call premium into our brokerage accounts, we are lowering our cost basis thereby increasing the opportunities for successful trades. This strategy can also be crafted to increase our capital gains (or decrease capital losses) when we decide […]

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