Mar 20, 2021 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
This really happened. From March to August 2020, many of the large cap technology stocks were on fire. Thor shared with me a covered call trade he executed with Amazon.com, Inc. (NASDAQ: AMZN) where the strike moved $1000.00 in-the-money (ITM) as share price headed to...
Mar 13, 2021 | Investment Basics, Option Trading Basics, Stock Investing, Stock Option Strategies
To decrease portfolio risk for our covered call writing and put-selling portfolios we must be well diversified and allocate a similar amount of cash per position. The allotment of cash per-position will rarely be precise but it is a goal we must incorporate into our...
Mar 6, 2021 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies
When we initiate a covered call trade by first buying a stock and then selling a call option, our cost-basis, in the BCI methodology, is the lower of the stock price or strike price. If we sell an in-the-money (ITM) strike, we deduct the intrinsic-value component of...
Feb 27, 2021 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, paper trading, Stock Option Strategies
Covered call writing is associated with 2 legs: we are long the stock and short the call option. If we add a protective put, we have converted the covered call trade to a collar trade which has both a floor (put strike) and a ceiling (call strike). The traditional...
Feb 20, 2021 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
The Poor Man’s Covered Call (PMCC) is a covered call writing-like strategy where deep in-the-money LEAPS options are used in lieu of long stock positions. Short-term out-of-the-money call options are sold against the long position. The technical term is a long...
Feb 13, 2021 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
One of our covered call writing exit strategies is rolling-out-and-up. We use this position management technique when our short call is in-the-money (ITM) as expiration approaches and we decide to retain the shares for the next contract month (or week). For example,...
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