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Delta and the moneyness of strikes

Delta as the Sole Criteria for Covered Call Writing Strike Selection

Strike selection is the second required skill when writing covered call options or selling cash-secured puts. Over the years I have been asked to suggest a specific Delta for strike selection implying that this statistic would be the sole criterion to determine strike determination. This article will make a case why Delta, although important, should […]

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Rolling Up in the Same Contract Month: A Real-Life Example with KMX

Position management or exit strategies for covered call writing and selling puts is the third required skill to achieve the highest possible return levels (stock and option selection are the first two). First, we must determine if an exit strategy opportunity actually exists and then, if so, which one to execute. On May 3rd 2019, […]

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put-selling calculations

Rolling Deep OTM Puts to a Higher Strike: A Viable Mid-Contract Strategy?

After selling an out-of-the-money (OTM) cash-secured put and then stock price accelerates substantially, the put value will decline. Share price and put value are inversely-related. This allows us to take advantage of our 20%/10% put-selling guidelines exit strategy discussed on pages 141 – 143 of my book, Selling Cash-Secured Puts. With this exit strategy, if […]

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reading an option chain

Converting a Covered Call Trade to a Collar Trade: An Analysis Using ALXN

When we sell and in-the-money or at-the-money strike and share price moves up substantially, we have an unrealized maximum return. On 4/5/2019, Doug wrote to me about such a situation he was in with Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN). He was considering buying a protective put to protect part of the unrealized profit and thought […]

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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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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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