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What is a SPAC (Special Purpose Acquisition Company)?

Are SPACs reliable candidates for our covered call writing and put-selling portfolios? This article will define and explain the anatomy of a SPAC so we can decide if they deserve a place in our conservative option-selling portfolios.   SPAC defined This is a company with no commercial operations (products or services) that is created to […]

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Adjusting Our Portfolio Mix to Achieve Diversification and Cash Allocation

To decrease portfolio risk for our covered call writing and put-selling portfolios we must be well diversified and allocate a similar amount of cash per position. The allotment of cash per-position will rarely be precise but it is a goal we must incorporate into our methodology. In this article, I will describe the process for […]

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Spinoffs and Stock Splits: How Multiple Corporate Events Can Impact Share Price

Our covered call writing and put-selling positions can be radically impacted by corporate events. In July 2020, Match Group, Inc. (NASDAQ: MTCH) showed extreme price volatility due to 2 corporate events, a spinoff and a stock split. Price dropped from $105.00 to $95.00. They also resulted in option contract adjustments. The loss was severe but […]

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Using Covered Call Options and Stock Dividends in Low-Interest Rate Environments

Covered call writing can be crafted to meet a myriad of goals in a wide range of market conditions. In May of 2020, the 10-year Treasury Bond yield was 0.65%. Bank interest rates in several countries were negative. At the same time, dividend yield on Dow 30 and S&P 500 dividend-bearing stocks were triple that […]

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Special Cash Dividends and Equity Distributions: Understanding Contract Adjustments

Contract adjustments to the terms of our covered call writing and put-selling options are due to corporate actions like mergers and acquisitions, special dividends and stock splits. This article will highlight the contract alterations resulting from special dividends and equity distributions.   Special cash dividends: 2 adjustment techniques   1. Ticker remains unchanged Number of […]

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“Hitting a Double” on the Last Day of a Contract

Exit strategies for covered call writing are critical components to our overall success. One of the strategies available to us is hitting a double. This is where we buy back the short call and wait for the stock price to recover allowing us to re-sell the same option. This creates 2 income streams in the […]

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What Do Covered Call Writing and Steroids Have in Common?

Most investors view covered call writing as a singular strategy where we buy a stock and then sell an option leveraging that security. In reality, educated option-sellers realize that one of the most remarkable advantages of using this strategy is that it can be crafted to achieve multiple goals and meet the trading style and […]

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Automating the 20%/10% Guidelines

Position management is the 3rd required skill for achieving the highest level of option-selling success. One of the most important of the BCI protocols for covered call writing are the 20%/10% guidelines which assists us is closing short calls when those opportunities are presented. This allows us to mitigate situations when share price declines. These […]

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Reverse Stock Splits: Understanding Contract Adjustments

Contract adjustments to the terms of our covered call writing and put-selling options are due to corporate actions like mergers and acquisitions, special dividends and stock splits. This article will highlight the contract alterations resulting from a reverse stock split.   What is a reverse stock split? This is a reduction in the number of […]

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Myths and Misunderstandings About Covered Call Writing

Covered call writing education must include debunking the myths associated with this strategy. When certain concepts are repeated often enough, they become accepted as truths whether they are accurate or false. The purpose of this article is to refute five of the most egregious of these misrepresentations.   1. Covered call writing should be used […]

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