In May 2020, Gaetan sent me his portfolio positions for the May 2020 contracts. His cash available was $33,000.00 and decided to diversify with 5 different stocks. I thought it would be a useful exercise to look at his positions and analyze what we believe his overall market assessment was at the time of his […]
The Collar Strategy: Using Longer-Term Put Expirations
When we add a protective put to our covered call trades the strategy is known as a collar. To reduce the monthly cost of the long put, some investors will consider using longer-term put expirations This article will explore the pros and cons of this approach using Ciena Corp. (NYSE: CIEN). Collar trade information […]
Covered Call Writing with TLT: Generating Premium and Dividend Income
The main goal of covered call writing is to generate option premium cash flow. Many investors also seek to develop dividend income in addition to the option premium revenue. One security that presents a unique scenario is iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT). This exchange-traded fund produces dividend income twelve times a year with […]
Protecting Our Covered Call Trades: Protective Puts Versus In-The-Money Strikes
Covered call writing is a low-risk, cash-generating strategy. We can lower the risk to an even greater extent by purchasing protective puts and by writing in-the-money (ITM) call options. Now, buying protective puts (called the collar strategy when used in conjunction with covered call writing) costs money and will lower our returns. Using ITM calls […]
Managing a Poor Man’s Covered Call Trade When Share Price Drops Below the LEAPS Strike
A typical Poor Man’s Covered Call (PMCC) trade involves buying a deep in-the-money call LEAPS option and selling short-term out-of-the-money call options which is protected by the long LEAPS position. In April 2020, Martin shared with me a PMCC trade he executed with PPL Corp. (NYSE: PPL) where share price declined below the LEAPS strike […]
Rolling Out-And-Up: 6-Week Returns
Option calculations help guide us to an accurate assessment of our covered call writing profits. It’s more meaningful to use percentages rather than dollar amounts when executing these calculations. For example, a $1000.00 profit on a $10,000.00 investment (10%) is much more significant than a $1000.00 return on a $100,000.00 investment (1%). That’s why percentages […]
Selling Deep OTM Cash-Secured Puts with Exit Strategy Enhancements
This is a follow-up cash-secured puts article to the one published last week where I detailed how I was selling deep OTM cash-secured puts on Apple Computer (AAPL) to generate weekly cash flow. I was using strikes with Deltas below -0.10%, approximating less than a 10% of ending in-the-money. My goal was to generate 0.4% […]
Selling Deep OTM Weekly Cash-Secured Puts to Generate Substantial Annualized Returns
Selling Cash-Secured Puts is a strategy similar to, but not precisely the same as, covered call writing. It is generally used to generate cash-flow as a standalone strategy but also can be implemented to buy a stock at a discount or used in conjunction with covered call writing (PCP strategy). During the COVID-19 crisis in […]
When Call Strikes Move Deep In-The-Money Early in the -Contract: A Real-Life Example with BLK
Exit strategies for covered call writing is the 3rd required skill that must be mastered to achieve the highest possible returns. In January 2020, a member shared with me a trade she executed with BlackRock, Inc. (NYSE: BLK). The stock was trading at a cost-basis of $500.00 when the February 21, 2020 deep out-of-the-money (OTM) […]
Analyzing Buy/Write Net Debit Limit Orders
Covered call writing trades can be entered by legging-in (buy stock and then sell option) or as a buy/write trade (one net debit limit order). In the latter order, the option premium is deducted from the stock price and the broker is required to execute the trade and that price or better or the trade […]
Podcast
- 50. Exit strategies Must Be Timed Properly
- 49. Analyzing a Multi Leg Covered Call Rolling Down Series of Trades
- 48. Rolling Deep OTM Cash Secured Puts
- 47. Rolling Up in the Same Contract Month
- 46. Should Delta Be the Sole Criteria for Covered Call Writing Strike Selection
- 45. Implied Volatility and Expected price Movement During the Life of Option Contracts
- 44. Can We Use ITM Strikes to Create a No Risk Covered Call Strategy?
- 43. Converting a Covered Call Trade to a Collar Trade
- 42. Why Was My OTM Put Exercised?
- 41. Collar Trades When Call Strikes Move Deep In The Money
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