Covered call writing, when combined with protective puts, is known as the collar strategy. The maximum gain is established by the short call strike while the maximum loss is defined by the long put strike. For example, if a stock is purchased for $48.00 per share and the $50.00 call is sold while the $45.00 […]
Rolling Down Our Put Positions: When and Why?
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 value declines to more than 3% below the strike price. […]
The Mysteries of a Put Sale
On 8/19/2017, Ron sent me an email detailing a cash-secured put trade he initiated in a virtual account. I saved the email to use in an article because I felt it would be instructive on several fronts. Ron’s trade with Abiomed, Inc. (NASDAQ: ABMD) 8/10/2017: Sell August 17 $155.00 put (sale price not […]
Writing Naked Calls on Poorly-Performing Stocks
Selling covered calls and cash-secured puts are the main strategies highlighted in our BCI community. Much of the information disseminated on the Blue Collar site, books and DVDs is based on member feedback, inquiries and comments. In September 2017, Marc sent me an email question about selling naked (without owning the underlying security before selling […]
Reasons for Early Exercise
Our covered call writing and put-selling options can be exercised at any time from the moment we sell these options until 4 PM ET on expiration Friday. This is the definition of American Style Options, the type associated with our stocks and exchange-traded funds. Early exercise (prior to contract expiration) is rare because option holders […]
The Collar Strategy from a Delta Perspective
When covered call writing is combined with protective puts the strategy is known as the collar strategy. The short call places a ceiling on gains and the long put represents a floor protecting losses. The two option positions should result in a net credit. Typically, out-of-the-money calls and puts are selected. Covered call writing and […]
Arbitrage: Part II
In part I of this arbitrage series we defined arbitrage as the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists because of […]
Buying Back Put Options When Share Price Gaps Up: A Real-Life Example with AVGO
When selling cash-secured puts our position management skills include buying back the short puts under certain circumstances. These include situations when share price moves up or down dramatically. When share price declines below the breakeven, we start losing money. Our guideline is to buy back the sold put if share price declines by more than […]
Selecting the Best Put Strike Based on Overall Market Assessment
Selling cash-secured puts requires us to master the three required skills: stock (or ETF) selection, option selection and position management. This article will highlight how to select a put strike based on our overall market assessment. Market assessment data published in BCI newsletters Investor Business Daily’s market assessment Dr. Eric Wish’s GMI Index BCI […]
Naked Options versus Covered Options: Where Should We Take a Stand?
Covered call writing and selling cash-secured puts are more conservative strategies than trading naked options (selling calls and puts without having the resources to execute the potential trade obligations, if exercised). A naked call occurs when a speculator writes (sells) a call option on a security without ownership of that security. It is one of […]
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Why Covered Call Writing Outperforms the Overall Market
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Ask Alan #154 – Huge profits Resulting in Unhappy Investors
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“Hitting a Double” Calculations with The Ellman Calculator
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Managing Earnings Reports on Long-Term Holdings
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What Covered Call Writing Has Meant To Me: A Financial Advisor’s Perspective by Guest Author Kevin Crowe
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The New Stock Market- Algorithmic and High Speed Trading
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Options That Expire Weekly and Conventional Expiration Cycles
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Why the 3% Guideline Applies to Puts but Not to Call Options
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Earnings Pre-Announcements Explained and Categorized
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Tax Implications of Writing Covered Calls against Long-Term Holdings
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Alan Ellman Premium members: This week's 8-page report
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Roni Well, there may be some nistake in the informat
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Sunny I have a question regarding PMCC. If we sell PMCC
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