One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For example, we may buy back the October $50.00 call option and then sell the November $55.00 call option. We would consider such action if the expiring strike […]
In-The-Money Call Strikes: Intrinsic Value Protects Time Value
Strike price selection is one of the 3 required skills for covered call writing and put-selling. When we sell in-the-money call options we are protecting our positions to the downside while still generating the time value initial profits we have established in our strategy goals. In return, we are relinquishing any opportunity to generate additional […]
The Covered Strangle: Selling Both Call and Put Options while Owning the Underlying Stock
Why not sell both covered calls and cash-secured puts on the same stock? I’ve been asked this question numerous times. There is actually a strategy that incorporates both BCI go-to strategies into one overall game plan. It is known as the covered strangle. Components of the covered strangle Buy stock Sell call option Sell […]
What Criteria Should We Use to Close our Covered Call Positions Early?
When we sell out-of-the-money call options, we are initiating bullish covered call writing positions. Our goals are to generate option premium as well as share appreciation from current market value up to the call strike price. When share value moves well above the strike, leaving that strike deep in-the-money, there is no opportunity to generate […]
Should We Close Our Deep-In-The-Money Strike or Allow Assignment?
When our covered call positions end up moving deep in-the-money, we are faced with the decision to close as our maximum profit has been realized or take no action and allow assignment. In October 2017, Andrew shared with me a trade he successfully executed and was faced with such a dilemma. Andrew’s trade with […]
Selecting Deep In-The-Money Strikes: A Real-Life Example
Option selection is the second required skill when selling call and put options. On 9/26/2017, George shared with me a trade he executed with Biogen, Inc. (BIIB). An in-the-money strike was sold and share price immediately accelerated. George was inquiring about how deep in-the-money (ITM) the strike prices should be set. George’s initial trade […]
Inverse Exchange-Traded Funds versus Shorting Stocks
In bear markets, one of the tools we can benefit from with our covered call writing and put-selling strategies is inverse exchange-traded funds (ETFs). An inverse ETF is also known as a short ETF or a bear ETF. These securities are constructed to return the exact opposite performance of a certain benchmark or index. Many […]
Reasons for Early Exercise
Our covered call writing and put-selling options can be exercised at any time from the moment we sell these options until 4 PM ET on expiration Friday. This is the definition of American Style Options, the type associated with our stocks and exchange-traded funds. Early exercise (prior to contract expiration) is rare because option holders […]
Special 1-Time Cash Dividends and Strike Prices of American Depository Receipts (ADRs)
Contract adjustments for covered call writing and put-selling are not uncommon events and we must be prepared when they occur. From time to time a certain corporate event will take place that will alter the terms of an equity options contract, making it different from the original standardized terms such as the number of deliverable […]
Hitting a Double with News-Related Market Overreactions
Stock selection, option selection and position management are the 3 required skills for covered call writing and put-selling. One of our go-to exit strategies is “hitting a double” where we buy back the original option sold if share price declines and then re-sell that same option as share price recovers. Stock prices whipsaw and that […]
-
Combining Dividend Capture with Covered Call Writing: Pros and Cons
-
Ask Alan 147 – “Why is the Ellman Calculator Showing Negative Returns?”
-
The Mysteries of a Put Sale
-
Technical Analysis Impacting Stock Eligibility for Option-Selling
-
Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks
-
The New Stock Market- Algorithmic and High Speed Trading
-
Options That Expire Weekly and Conventional Expiration Cycles
-
Why the 3% Guideline Applies to Puts but Not to Call Options
-
Earnings Pre-Announcements Explained and Categorized
-
Tax Implications of Writing Covered Calls against Long-Term Holdings
-
Jay Thanks for the update, Mario, great results in a d
-
Alan Ellman Greg, I am a firm believer in asset allocation.
-
Greg Alan, What is your recommendation or best pract
-
MarioG Trading Experiences through June 15, 2018 Expirati
-
