When studying option trading basics we learn the equation for option premium value is: Premium = time value + intrinsic value If the strike price is at- or out-of-the-money the premium is all time value. Another basic principle is that time value decreases as we approach expiration Friday. Unless the strike price is deep, deep […]
Covered Call Writing: The Case For 1-Month Options
I sell predominantly 1-month options when selling covered calls. This decision was NOT based on anything I read or was told, but rather on experience and common sense. Most stocks with options have at least four expiration cycles affiliated with them at any point in time…the current month, the next month and two more months further […]
Sample Covered Call Portfolio Using The Current Premium Watch List
Several of our Premium Members have requested we provide sample portfolios based on the CURRENT Premium Watch List as a guide to assist in mastering the strategy of covered call writing. In today’s article I will use the watch list dated 3-8-13 (stats taken on Wednesday, 3-13-13). The stocks we select in general are based […]
Setting Up Your Covered Call Portfolio Using The Ellman Calculator
Covered call writing involves options calculations…there’s no getting around it! It’s been a while since we talked math. What’s with all the frowns? Mastering and understanding the calculations (The Ellman Calculator will do all the work) will enhance our bottom lines…more cash in our pockets. With that in mind, let’s set up a hypothetical portfolio of […]
Mini Options- A New Product For Retail Investors
There is a new options product that will begin trading on March 18th which has the potential to add great flexibility to our covered call writing strategy. They are called mini options and I’m excited to present this information to you because the product is geared to average retail investors (aka Blue Collar Investors) like […]
The 10 Most Common Mistakes Made By Covered Call Writers And How To Avoid Them
Your neighbor bursts into your house and exclaims “I just read this article…You buy a stock and sell an option and cash flows into your account instantly. It’s a miracle! I’m getting started tomorrow” If you are a good neighbor and knowledgeable about covered call writing you will immediately tie him to a chair, put tape over […]
Margin Accounts and Covered Call Writing
Can covered call writing profits be leveraged to even higher levels using margin accounts? In real estate investing, the concept of leveraged investing is well known and documented in such best-sellers as Robert G. Allen’s Nothing Down for the 2000s and Michael A. Lechter’s OPM (Other People’s Money). The idea of generating profit while using […]
Inverse Exchange-Traded Funds and Covered Call Writing
Last month I published an article titled Complex and Leveraged Exchange-Traded Funds. I discussed the goals and risks associated with many of these products. One of the topics examined was Inverse Exchange-Traded Funds. Here is a brief review: Inverse ETFs use derivatives to bet against the direction of financial markets. These are known as short or […]
Put-Call Parity: Understanding Option Pricing
One of the mission statements of The Blue Collar Investor is to share information so that we can master option trading basics and become better investors. Many times I will research and write an article based on inquiries from our members and that is why I am able to continue to write weekly articles year […]
Early Exercise and Assignment of Options
When we sell a covered call option, we are undertaking an obligation for which we are well paid. Should the option holder decide to exercise that option, we must sell our shares at the specified strike price at or prior to the expiration date. This is the nature of American style options as opposed to […]
Podcast
- 104. Special 1 Time Dividends and Contract Adjustments
- 103. The Collar Strategy Using Long-Term Put Expirations
- 102. Analyzing Market Assessment Based on Portfolio Setup
- 101. Covered Call Writing: "Hitting a Double" on the Last day of a Contract
- 100. Analyzing LEAPS for The Poor Man's Covered call Strategy (PMCC)
- 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
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