Are SPACs reliable candidates for our covered call writing and put-selling portfolios? This article will define and explain the anatomy of a SPAC so we can decide if they deserve a place in our conservative option-selling portfolios. SPAC defined This is a company with no commercial operations (products or services) that is created to […]
Implied Volatility (IV), IV Rank and IV Percentile: Defined and Practical Applications
When writing covered calls and selling cash-secured puts, the implied volatility of the underlying securities is directly related to the premiums we receive and also measures the risk we are taking with our option-selling trades. We protect ourselves from using IVs that are too high or too low by defining our initial time-value return goal […]
Spinoffs and Stock Splits: How Multiple Corporate Events Can Impact Share Price
Our covered call writing and put-selling positions can be radically impacted by corporate events. In July 2020, Match Group, Inc. (NASDAQ: MTCH) showed extreme price volatility due to 2 corporate events, a spinoff and a stock split. Price dropped from $105.00 to $95.00. They also resulted in option contract adjustments. The loss was severe but […]
Using Covered Call Options and Stock Dividends in Low-Interest Rate Environments
Covered call writing can be crafted to meet a myriad of goals in a wide range of market conditions. In May of 2020, the 10-year Treasury Bond yield was 0.65%. Bank interest rates in several countries were negative. At the same time, dividend yield on Dow 30 and S&P 500 dividend-bearing stocks were triple that […]
Anatomy of a Reverse Stock Split
Option contracts can be standard or adjusted. Certain corporate events may change standard option contracts to adjusted contracts. These events include stock splits, mergers, acquisitions, special dividends, spin-offs and reverse splits. After these events, options are altered to reflect these changes and make buyers and sellers of options whole. This article will focus in on […]
Reverse Stock Splits: Understanding Contract Adjustments
Contract adjustments to the terms of our covered call writing and put-selling options are due to corporate actions like mergers and acquisitions, special dividends and stock splits. This article will highlight the contract alterations resulting from a reverse stock split. What is a reverse stock split? This is a reduction in the number of […]
Dividend Yield Should Be a Secondary Factor When Selecting Stocks for Our Covered Call Writing Portfolio
Combining covered call writing premiums with high dividend yields can be an enticing investment approach. In October 2019, Gerry wrote to me about using MPLX LP (NYSE: MPLX) in her option-selling portfolio and pointed to the generous dividend yield and real-estate component as the reasons for this consideration. In the BCI methodology, we use fundamental […]
Creating “Dividends” for Non-Dividend Stocks: A Real-Life Example with PAYC
Covered call writing can be beneficial to us in a variety of circumstances. This article will highlight how this strategy can be implemented to create a dividend-like cash flow for stocks that currently offer no dividend income. This can be particularly useful for those who will only purchase dividend stocks and miss out on other […]
Combining In-The-Money Strikes and Stock Dividends to Provide Protection in Bear Markets + Holiday Discounts
When establishing our covered call writing trades, we must factor in current market conditions to either add protection in bear and volatile environments or to take advantage of normal to bull market scenarios. On May 17, 2019, Mauricio sent me a diagrammatic strategy proposal that would lower the breakeven using an in-the-money (ITM) strike as […]
Stock Selection: Using Secondary Parameters from Our Premium Stock Reports
Stock selection is the first of 3-required skills essential to become an elite option-seller. Option selection and position management are the other two. On 3/31/2019, Sunny wrote to me inquiring about 2 stocks, Edwards Lifesciences Corp. (NASDAQ: EW) and Regeneron Pharmaceuticals (NASDAQ: REGN). He was deciding between these 2 securities in the “medical industry” and […]
Podcast
- 99. Anatomy of a Reverse Stock Split
- 98. Analyzing LEAPS Options for the Poor Man's Covered Call
- 97. Managing Our Poor Man's Covered Call Trades When Share Price Drops Substantially
- 96. Protecting Our Covered Call Trades: Protective Puts and In-the-Money Strikes
- 95. Covered Call Writing to Generate Premium and Dividend Income
- 94. Covered Call Writing Net Debit Limit Orders
- 93. WHEN CALL STRIKES MOVE DEEP ITM EARLY IN A CONTRACT
- 92. Selling Deep OTM Cash-Secured Puts to Create High-Probability Returns
- 91. Portfolio Overwriting Analyzed
- 90. Entering a Collar Trade
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