Covered call writing is defined as first purchasing or already owning the underlying security and then selling the corresponding call option. By doing so, we are protected; we know our cost-basis. A BCI member proposed to me an extreme bear market strategy where a deep out-of-the-money (OTM) call is sold first and if the stock […]
The Significance of Breakeven When Constructing Our Poor Man’s Covered Call (PMCC) Trades: A Real-Life Example with International Business Machines Corp. (NYSE: IBM)
The PMCC Strategy involves buying LEAPS call options (expirations 1 – 2 years out) and selling short-term call options against the long position. The technical term is a long call diagonal debit spread. In our BCI methodology, the trade construction must meet a required trade initialization formula where the difference between the 2 strikes + […]
Entering and Adjusting Our Covered Call Trades Using the BCI Trade Management Calculator: A Real-Life Example with WBA
Entering, managing and archiving our covered call writing and put-selling trades are critical to our overall success as well as allowing us to learn and benefit from our investment history. To demonstrate how to achieve a high level of organization and management of our trades, this article will highlight a real-life series of trades with […]
20%/10% Guidelines: “Hitting a Double” in the Same Day: A Real-Life Example with Consumer Staples Select Sector SPDR (NYSE: XLP)
After entering our covered call writing trades, we immediately enter our 20%/10% BTC (buy-to-close), GTC (good-until-cancelled) limit orders. If and when these thresholds are reached (resulting from share price decline) are short calls will be closed (bought back). At that point, we can plan our next steps to mitigate losses or turn losses into gains. […]
Why Did Option Value Decline After Stock Price Accelerated? A Real-Life Example with United Health Group Inc. (NYSE: UNH)
We, as covered call writers and sellers of cash-secured puts, are on the sell-side of options. Every so often, I receive interesting emails with educational value from members who buy options. On 4/21/2022, Kevin shared with a trade he executed with UNH where share value went higher after purchasing a call option, but the value […]
Evaluating Pre- and Post-Market Opening Calculations; A Real-Life Example with The Simply Good Foods Company: (Nasdaq: SMPL)
Preparing for our initial covered call writing and cash-secured put trades starts pre-market. After developing a watchlist of eligible securities, we turn to the option-chains to determine if initial time-value returns align with our stated goals. Market-makers will be a bit hesitant to publish bid-ask spreads that are in our best interest until they can […]
How to Select the Best Covered Call Writing Strikes in Bear & Volatile Markets
Option selection is the 2nd of the 3 required skills for achieving the highest possible returns when writing covered calls or selling cash-secured puts. Option decisions include strike and expiration date choices. This article will focus in on strike selection for covered call writing in bear and volatile market where we take defensive positions that […]
Setting Our 20%/10% Guidelines After Rolling an Option Out or Out-And-Up
Rolling-out is a covered call writing exit strategy we frequently use when a strike is expiring in-the-money (ITM) and we want to retain the underlying shares for the next contract cycle. After closing the short call in the current month prior to rolling, a new trade with the same security is set up in our […]
Portfolio Overwriting in High Implied Volatility (IV) Markets + Alan’s Wealth365 Webinar Registration Link
One of our covered call writing-like strategies is portfolio overwriting. The strategy involves selecting deep out-of-the-money (OTM) strikes that will generate lower returns than traditional covered call writing but also decreases the likelihood of exercise (our shares being sold). The returns will still be significant when annualized, while still enhancing the probability of avoiding exercise […]
How to Enter & Calculate Closing a Weekly Put Trade After Rolling the Option in the Same Contract Cycle + Alan’s Wealth365 Webinar Registration Link
When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. The option seller (that’s us) sets those parameters. In return, we receive a cash premium. The implementation of exit strategy opportunities allows us to maximize the success of our trades. This article will […]
Podcast
- 92. Selling Deep OTM Cash-Secured Puts to Create High-Probability Returns
- 91. Portfolio Overwriting Analyzed
- 90. Entering a Collar Trade
- 89. Am I Losing Money When I Buy Back My Deep ITM Covered Call Options?
- 88. Creating a Portfolio of Weekly Cash-Secured Puts
- 87. Bear Market Concerns and Our Option Selling Portfolios
- 86. How to Use Technical Analysis and Market Assessment for Strike Selection
- 85. Automating the 20% /10% Guidelines for Covered Call Writing
- 84. Analyzing and Calculating Multi Leg Rolling Down Covered Call Trades
- 83. Setting Up a Portfolio of Nasdaq and S&P 500 Stocks in a User-Friendly Manner
Recent Comments