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 […]
Why the 3% Guideline Applies to Puts but Not to Call Options
Selling options (covered call writing and selling cash-secured puts) will result in a positive outcome in the first four of the following five scenarios: Stock price moves up significantly Stock price moves up slightly Stock price remains the same Stock price moves down slightly (less than option premium) Stock price moves down substantially Although it […]
Setting Up a Covered Call Trade by First Selling an Out-Of-The-Money Put
A covered call trade can be initiated by first purchasing the underlying stock or exchange-traded fund (ETF). It can also be launched by first selling an out-of-the-money (OTM) cash-secured put and allowing exercise if the put strike is in-the-money (ITM) at expiration. This article will highlight a real life trade with LogMein, Inc (LOGM) which began by selling […]
Should We Favor Put-Selling Over Covered Call Writing?
Many consider covered call writing and selling cash-secured puts the same strategy with the same risk-reward profiles. To me, they are similar with slight differences that must be understood to make a decision as to which strategy to favor. In the end, it will be like selecting between an ice cream sunday topped with whipped […]
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Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks
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In-The-Money Call Strikes: Intrinsic Value Protects Time Value
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The Covered Strangle: Selling Both Call and Put Options while Owning the Underlying Stock
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Ask Alan #146 – “The Cost of Rolling Out and UP”
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What Criteria Should We Use to Close our Covered Call Positions Early?
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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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Barry B Premium Members, This week's Weekly Stock
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Roni Mario, you are totally right about being carefu
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Jay Hi Duminda, As the name implies if you "co
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Alan Ellman Duminda, Protective puts (called a "collar
- Rolling Out-And-Up: Explaining the "Bought-Up" Value of our Stocks | The Blue Collar Investor […] Store […]
