Contract adjustments to the terms of our covered call writing and put-selling options are due to corporate actions like mergers and acquisitions (see the thread on last week’s blog commentary regarding AAN), special dividends and stock splits. Stock splits fall into 3 categories: Even splits Odd splits Reverse splits: (1-for 5, as an example) This […]
Analyzing LEAPS for The Poor Man’s Covered Call + Free Webinar Registration Link
The Poor Man’s Covered Call (PMCC), also known as a long call diagonal debit spread, is where deep in-the-money (ITM) LEAPS options are used in place of the long stock position. As with all strategies, the PMCC has its advantages and disadvantages but the main reason this strategy appeals to retail investors is that the […]
“Hitting a Double” on the Last Day of a Contract
Exit strategies for covered call writing are critical components to our overall success. One of the strategies available to us is hitting a double. This is where we buy back the short call and wait for the stock price to recover allowing us to re-sell the same option. This creates 2 income streams in the […]
Analyzing Market Assessment Based on Portfolio Setup
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 […]
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 […]
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% […]
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
Recent Comments