Feb 2, 2019 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Trade Execution, Stock Option Strategies
When entering our covered call trades with new positions, we buy the stock and immediately sell the option. This can be accomplished by legging-in or using a buy-write combination form. This is an important guideline because we will be assured of capturing our initial...
Jan 12, 2019 | Investment Basics, Option Trading Basics, Options Trade Execution, Stock Investing, Stock Option Strategies
Why should we spend the time to educate ourselves on how to implement and manage covered call writing trades? The answer is simple: Once the 3 required skills (stock selection, option selection and position management) are mastered, we will put ourselves in a position...
Sep 15, 2018 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
Covered call writers hold two positions. We are long (own) the stock and short (sold) the call option. It is intuitive to investors that it is to our advantage if the stock price accelerates or at least does not decline in value. There are five possible outcomes in...
Aug 18, 2018 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
Exit strategies for covered call writing includes closing a trade when share price rises above the original strike price sold. When formulating these decisions, we must factor in the cost-to-close as it relates to the opportunity to generate more profit. On November...
Jul 14, 2018 | Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Put-selling, Stock Option Strategies
Rolling Down Our Put Positions: When and Why? When selling cash-secured puts, our breakeven stock price is the (out-of-the-money) strike price less the put premium. Our exit strategy guideline as to when to close the short put (buy back the put) is when share...
Dec 16, 2017 | Investment Basics, Option Trading Basics, Options Trade Execution, Stock Option Strategies
Understanding stock and option pricing requires an awareness of arbitrage and market efficiency. Although most retail investors do not have the tools to take advantage of arbitrage opportunities, a comprehensive understanding of how it works adds to our...
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