Managing our covered call positions is essential to our overall option-trading success. In July 2019, KA Lau shared with me a series of questions he developed based on a real-life trade. I felt that these were excellent educational questions and will now share them with the BCI community. I added 4 more questions for a […]
Should I Unwind My Covered Call Trade 1 Week Prior to Contract Expiration?: A Real-Life Example with Alibaba Group
Covered call writing exit strategies are critical to our overall success. There are times, however, when the best action is no action at all. On July 25th 2019, Rob shared with me a successful trade he executed and was considering closing 1 week prior to the 8/2/2019 expiration. For an answer, we need to turn […]
Rolling Decisions on Expiration Friday: A Real-Life Example with Veeva Systems
Position management is the 3rd required skill for our covered call writing and put-selling success. On 7/19/2019, Larry shared with me a series of trades he executed with Veeva Systems Inc. (NYSE: VEEV). He astutely “hit a double” and was now looking to roll the option to the following month. Larry’s trades and inquiry (in […]
Evaluating Stock Purchase Price and Breakeven When Rolling Out-And-Up
When we write a covered call, our breakeven is stock purchase price – entire call premium. If we buy a stock for $48.00 and sell an option for $2.50, the breakeven is $45.50. In June 2019, John shared with me a series of trades he executed with Planet Fitness, Inc. (NYSE: PLNT) where he wrote […]
Is This Trade a Winner or a Loser?: A Real-Life Example with XLE
Covered call writers must understand and evaluate the success (or lack thereof) of our trades. Simply stated, are they winners or losers? In June 2019, Van shared with me trades he executed with the exchange-traded fund (ETF), Energy Select Sector SPDR Fund (NYSE: XLE). He was trying to categorize his trade as a winner or […]
Analyzing 4-Day and 2-Month Trades with XBI
Mario was generous in sharing his covered call writing trades with SPDR S&P Biotech ETF (NYSE: XBI). The trades were executed over a 2-month time-frame, the last of which was a 4-day Weekly option. Mario’s trades with XBI 4/17/2019: Buy XBI at $84.95 4/17/2019 – 6/2019: Sell calls and “hit doubles” to lower cost-basis […]
Combining In-The-Money Strikes and Stock Dividends to Provide Protection in Bear Markets + Holiday Discounts
When establishing our covered call writing trades, we must factor in current market conditions to either add protection in bear and volatile environments or to take advantage of normal to bull market scenarios. On May 17, 2019, Mauricio sent me a diagrammatic strategy proposal that would lower the breakeven using an in-the-money (ITM) strike as […]
Making Money with Technology Stocks: Investing with QQQ
The exchange-traded fund (ETF) that has appeared most frequently in our premium member ETF reports is Invesco QQQ Trust (NASDAQ: QQQ). This fund consists of 100 of the largest non-financial companies (predominantly technology companies) that trade on the NASDAQ exchange. As of June 2019, the top 3 holdings in QQQ are Microsoft (MSFT), Amazon (AMZN) […]
In-The-Money Cash-Secured Puts: Allow Exercise or Roll the Option When Using the PCP Strategy?
As contract expiration nears, we must be prepared how to manage our in-the-money (ITM) cash-secured puts. Assuming we initially sold an out-of-the-money (OTM) put which is now ITM, share price has declined. We can assume that by following the BCI guidelines for position management, the current stock price is not more than 3% below the […]
Selling Deep In-The-Money Calls to Exit Stock Positions
Covered call writing is used predominantly to generate cash flow in a low-risk manner. But it can also be used to exit stock positions while mitigating losses in those trades. As an example, I will use a series of trades shared with me by Ashvin on May 16th, 2019. The underlying security was iShares MSCI […]
