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Can We Manage Our In-The-Money Strikes to Create a No-Risk Investment Strategy?

Covered call writing is a low-risk cash-generating strategy. It is not a no-risk strategy. As we become educated and master the 3-required skills (stock selection, option selection and position management), it is understandable why BCI members try to figure out strategies that can convert low-risk to no-risk. Here is a common inquiry I receive from […]

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covered call writing and the option Greeks

Timing Our Covered Call Trades: The Best Time to Sell Our Options After Buying the Stock

The goals of covered call writing include generating monthly cash flow and preserving capital. We use every fundamental, technical and common-sense principle available to maximize our profits and protect our cash. Paul A. previously sent me an excellent question that motivated this article: …if the market has a down day and drags down the price […]

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covered call writing exit vstrategies

“Hitting a Double” with XBI: Earn $100 in Four Minutes

Position management (exit strategies) is one of the 3-required skills for successful covered call writing and put-selling. “Hitting a double” involves buying back the short call using our 20%/10% guidelines and then re-selling that same option when share price recovers. On 3/13/2019, Mario was kind enough to share with us his trades with SPDR S&P Biotech […]

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covered call writing and market volatility

Using the CBOE Volatility Index (VIX) for Our Strike Price Selection

Options trading basics teaches us that the VIX or CBOE Volatility Index reflects the market’s expectation of the upcoming 30-day volatility. It measures market risk and is also known as the investor fear gauge. With this in mind, covered call writers are faced with a dilemma. Increased market volatility will translate into higher option premiums […]

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put-selling calculator

Covered Puts Are NOT Cash-Secured Puts

Selling cash-secured puts is one of the go-to strategies in the BCI methodology. There has been some confusion for some of our members who conflate this strategy with covered puts, a completely different strategy. This article will define and compare the two strategies.   Selling cash-secured puts defined A put option (generally out-of-the-money) is sold […]

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covered call writing with protective puts

Collar Trades When Call Strikes Move Deep In-The-Money: A Real-Life Example with TEAM

In August 2018, Duminda shared with me a successful collar trade he executed with Attlassian Corp (NASDAQ: TEAM). He was considering 2 exit strategies: Closing all legs of the trade and using the cash to enter a new position Allowing assignment and selling the put, if any value at expiration   Initial structuring of Duminda’s […]

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Blackjack and Covered Call Writing: Throwing the Odds in Our Favor with PayPal Holdings Inc. (NASDAQ: PYPL)

Covered call writers and all investors using stock options strategies have one thing in common: we all want to achieve the highest possible returns within the framework of our own personal risk tolerance. The focus of this site and The Blue Collar Investor is to provide the education and to share ideas that will help […]

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covered call writing calculations

Rolling Out-And-Up: Explaining “Bought-Up” Value

Covered call writing calculations should be as accurate as possible so that we can assess the success and feasibility of our trades. When we roll in-the-money (ITM) options out-and-up there is frequently an option debit which, on first glance, may make the trade appear to be a losing one. However, by factoring in the impact […]

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Interpreting Exit Strategy Calculations Versus Final Calculations

Mastering option calculations is an essential skill needed to attain the very highest covered call writing returns. Although the Ellman Calculator will do most of the heavy lifting for us, understanding the reasons behind these calculations and when and how to apply them, will make us all more skilled investors. Recently a BCI member sent […]

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technical analysis for covered call writing

Covered Call Writing with a Biotech Company: A Real-Life Example with Argenx (NASDAQ: ARGX)

Covered call writing (as well as put-selling) premiums are directly related to the implied volatility of the underlying stock or exchange-traded fund (ETF). Biotech stocks are particularly volatile due to the success (or lack thereof) of the pharmaceuticals they are developing. Highly volatile underlyings represent the good news of higher premiums and the bad news […]

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