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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 […]

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put-selling calculations

Rolling Deep OTM Puts to a Higher Strike: A Viable Mid-Contract Strategy?

After selling an out-of-the-money (OTM) cash-secured put and then stock price accelerates substantially, the put value will decline. Share price and put value are inversely-related. This allows us to take advantage of our 20%/10% put-selling guidelines exit strategy discussed on pages 141 – 143 of my book, Selling Cash-Secured Puts. With this exit strategy, if […]

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exercise of options

Why Was My Short Out-Of-The-Money Put Exercised?

When we sell covered calls or cash-secured puts, we understand that if a strike ends up in-the-money at expiration, that option will be exercised over the weekend and shares will be sold or purchased depending on the option type (for calls, our shares are sold; for puts, new shares are purchased with the cash set […]

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put-selling calculator

Covered Puts Are NOT Cash-Secured Puts

Selling cash-secured puts is one of the go-to strategies in the BCI methodology. There has been some confusion for some of our members who conflate this strategy with covered puts, a completely different strategy. This article will define and compare the two strategies.   Selling cash-secured puts defined A put option (generally out-of-the-money) is sold […]

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selling cash-secured puts calculations

Selling Cash-Secured Puts to Lower Cost basis

Selling cash-secured puts can be used to generate monthly cash flow and to buy a stock at a discount. It can also be used to lower the cost-basis of shares already owned. In November 2018, John shared with me a trade he was in with Halliburton Company (NYSE: HAL) using precisely this strategy. This article […]

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Ellman Calculator

Should We Add a Short Put to Our Collar Trades?

A collar trade is a covered call trade with a protective put. Jim recently wrote to me asking about the efficacy of also selling an out-of-the-money put to help pay for the cost of the protective put. This article will analyze this series of trades to assess the pros and cons of adding that fourth […]

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strike price selection

Strike Price Selection When Selling Cash-Secured Puts: A Real-Life Example with WWE

Strike price selection is one of the 3-required skills when selling covered calls or cash-secured puts. This article will highlight the choices and rationale for our decisions when selling puts for World Wrestling Entertainment, Inc. (NYSE: WWE) on 9/24/2018.   Bullish price chart for WWE     Option-selling lowers our cost-basis and therefore we make […]

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covered call writing with VIX

VIX Covered Call Writing: Selling Options Against Market Volatility

Traditional covered call writing involves first buying a stock (or exchange-traded fund) and then selling a corresponding call option. The result of the initial trade is to generate cash flow from the option sale and lower our cost basis on the stock side. Based on member feedback, there has been a growing interest in writing […]

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BCI Collar Calculator

Protective Puts and the Collar Strategy: Selecting the Best Strike Prices/ Last Chance for Holiday Orders

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 […]

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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. […]

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