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 […]
Put-Selling in Margin Accounts
Whether I am selling call or put options I prefer to use a cash account. That’s where we invest and utilize only our own cash to purchase stock and secure put trades. More aggressive investors may want to magnify their returns by leveraging margin accounts. This entails borrowing money from the broker based on rules and regulations […]
Selling In-The-Money Puts to Generate Higher Premiums: Evaluating a Real-Life Trade
Selling Cash-Secured Puts can be used to accomplish several goals; Generate cash flow Buy a stock at a discount Used as part of a multi-tiered option selling strategy along with covered call writing (PCP strategy) Our strategy goal along with overall market assessment, chart technicals and personal risk tolerance will ultimately guide us to the […]
Comparing Covered Call Writing and Selling Cash-Secured Puts
An accepted myth is that covered call writing and selling cash-secured puts are precisely the same strategy. The reason this statement is generally accepted by many investors is that they have the same risk-reward profiles or profit and loss graphs: In this article, other similarities will be discussed as well as some distinct differences […]
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Rolling Out-And-Up: Explaining “Bought-Up” Value
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Interpreting Exit Strategy Calculations Versus Final Calculations
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Ask Alan #160 – Comparing Protective Puts and Position Unwinding as Strike Moves Deep In-The-Money
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Covered Call Writing with a Biotech Company: A Real-Life Example with Argenx (NASDAQ: ARGX)
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In-The-Money Covered Calls: Intrinsic Value Protects Time Value: A Real-Life Example with TEAM + New Tool Coming Soon
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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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Jay Hoyt, Please enjoy a nice time at the Biergarte
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Hoyt T Jay, Getting ready to go to the Biergarten. Had
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Roni Thank you again Jay, you are a good and dear frien
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