Dividend capture is the main reason for early exercise of our covered call writing trades. More specifically, ex-dividend dates are the times most susceptible to early exercise and having our shares sold at the strike price. This article will analyze the profitability or lack thereof of taking such action. On July 3, 2022, Graham shared […]
Will My Stock Be Sold Because of the $2.00 Dividend? A Real-Life Example with Star Bulk Carriers Corp. (Nasdaq: SBLK)
On 2/21/2022, Bob wrote a 3/17/2022 $29.00 call on SBLK. On 2/26/2022, SBLK was trading at $31.76 and the cost-to-close the short call was $2.78. On 3/1/2022, SBLK was going ex-dividend for an eventual $2.00 per-share distribution. Will Bob’s shares be sold the day prior to the ex-date? Case for early exercise Ex-dividend dates […]
Should Good News Discourage Us From Entering a Covered Call Trade?
We examine the BCI Premium Stock Report on the Sunday May 23, 2021, after expiration Friday, for our Monday trade selections. One of the securities we choose is Applied Materials, Inc. (Nasdaq: AMAT). On Monday morning, May 24th, AMAT gaps up well above the price movement of the S&P 500. Is AMAT now too expensive? […]
Managing Implied Volatility Risk by Establishing an Initial Time-Value Return Goal Range + Webinar Login Link
When screening for eligible securities for covered call writing and selling cash-secured puts, we must establish how much risk we are willing to incur. There is no right or wrong here as the appropriate amount will vary from investor-to-investor. To determine security risk, we can look up implied volatility (IV) stats but that will simply […]
How to Set Up a Portfolio of Nasdaq and S&P 500 Stocks in a User-Friendly Approach
Covered call writers and sellers of cash-secured puts know the importance of portfolio diversification. If one security under-performs, the others can compensate. This article will demonstrate how to craft a portfolio of large-cap tech and blue-chip companies for our option-selling strategies. Strategy goals Portfolio mix of blue-chip and technology companies User-friendly system Broad diversification […]
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 […]
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 […]
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 […]
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 […]
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 […]
Podcast
- 96. Protecting Our Covered Call Trades: Protective Puts and In-the-Money Strikes
- 95. Covered Call Writing to Generate Premium and Dividend Income
- 94. Covered Call Writing Net Debit Limit Orders
- 93. WHEN CALL STRIKES MOVE DEEP ITM EARLY IN A CONTRACT
- 92. Selling Deep OTM Cash-Secured Puts to Create High-Probability Returns
- 91. Portfolio Overwriting Analyzed
- 90. Entering a Collar Trade
- 89. Am I Losing Money When I Buy Back My Deep ITM Covered Call Options?
- 88. Creating a Portfolio of Weekly Cash-Secured Puts
- 87. Bear Market Concerns and Our Option Selling Portfolios
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