May 11, 2019 | Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Put-selling, Stock Investing, Stock Option Strategies
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)...
Mar 30, 2019 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Put-selling
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...
Mar 9, 2019 | Investment Basics, Option Trading Basics, Options Calculations, Put-selling, Stock Option Strategies, Technical Analysis
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. ...
Mar 2, 2019 | Exchange-Traded Funds, Investment Basics, Option Trading Basics, Put-selling, Stock Option Strategies
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...
Dec 15, 2018 | Investment Basics, Option Trading Basics, Options Calculations, Put-selling, Stock Option Strategies
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...
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...
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