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Understanding the Math of Unwinding Covered Call Writing Trades Early: A Real-Life Example with Invesco Solar ETF (NYSE: TAN)

On October 6, 2020, Alex from Mexico shared with me a covered call writing trade he executed with TAN. He was considering unwinding the trade using our mid-contract unwind exit strategy and wanted to know how I analyze these scenarios. This article will detail the calculations used in the Unwind Now tabs of the Elite […]

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Selecting the Best ITM Strikes for Covered Call Writing: A Real-Life Example with Etsy, Inc. (Nasdaq: ETSY)

In challenging market environments, we favor in-the-money strikes for our covered call trades. The intrinsic-value component of our option premiums will provide additional downside protection and lower the breakeven price point (BE) below that of at-the-money and out-of-the-money strikes. But which ITM strike should we select? This article will explain the BCI approach to select […]

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Dividends and After-Hour News Causing Exercise of OTM Call Strikes: A Real-Life Example with Financial Select Sector SPDR Fund (NYSE: XLF)

On December 21, 2020, Donna shared with me a successful trade she executed with XLF. What made this trade interesting was that the option was exercised after expiration when the strike closed out-of-the-money. This article will examine the reasons for this unusual circumstance.  Donna’s trade 11/24/2020: Buy 300 x XLF at $28.59 11/24/2020: STO 3 […]

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Using Delta to Create Low-Risk/ High-Return Put-Selling Trades: A Real-Life Example with ETSY, Inc. (NASDAQ: ETSY)

When selling cash-secured puts, our strikes are selected based on our initial time-value return goal range and personal risk-tolerance. In the BCI methodology, we use only out-of-the-money (OTM) cash-secured puts unless our objective is to purchase a stock at a discount and have those shares put to us sooner rather than later. There are times […]

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Status of a Rolling-Down Trade with Williams-Sonoma, Inc. (NYSE: WSM)

Exit strategies for covered call writing is a critical element necessary to maximize our returns. In December 2020, Alan K shared with me a rolling-down trade he executed with WSM and was curious as to the total trade status. This article will highlight the series of trades from 11/23/2020 to 12/9/2020 for the December 2020 […]

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Holding a Stock Through an Earnings Report: A Real-Life Example with Atlassian Corp. (Nasdaq: TEAM)

Covered call writers are frequently faced with scenarios when earnings reports are due out on securities where we have long-term bullish assumptions. In October 2019, Mark shares with me a dilemma he was facing with TEAM. The October 2019 monthly contracts expired on 10/18/2019 but there was an earnings release due on 10/17/2019. This article […]

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Using the Nasdaq-100 Volatility Index (VOLQ) in Covered Call Writing Decisions: A Real-Life Example with Invesco QQQ Trust (Nasdaq: QQQ)

One of the most popular exchange-traded funds (ETFs) used as underlyings for covered call writing is Invesco QQQ Trust (Nasdaq: QQQ) which consists of 100 of the largest domestic and international non-financial companies listed on the Nasdaq exchange. It is the ETF I have used the most over the past 2 decades of option-selling. This […]

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What is a SPAC (Special Purpose Acquisition Company)?

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 […]

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Should I Roll-Out When My Option is DITM Mid-Contract?

Exit strategy opportunities for covered call writing must be recognized and acted upon when indicated. It is important to understand when and how to react to these situations and determine the best exit strategy, if any.  In October 2020, Patrick shared with me a covered call trade he had executed and was considering closing the […]

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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 […]

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