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 […]
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 […]
Buyers Have Rights, Sellers Have Obligations: Covered Call Writing in a Nutshell
Covered call writers get paid cash when selling call options. Call buyers pay cash to own the options. This article will highlight the reasons options are bought and sold as it relates to covered call writing. We will use a real-life example with CarMax, Inc. (NYSE: KMX), a stock on our Premium Stock Report on […]
REITS: Good Covered Call Writing Candidates? A Real-Life Example with PennyMac Mortgage Investment Trust (NYSE: PMT)
REITs (real estate investment trusts) invest directly in income-producing real estate and is traded like a stock. In September 2019, Clifton wrote to me about PMT inquiring if it would make a viable covered call writing candidate. He pointed out that this security offered an 8.5% annualized dividend yield. To evaluate, we will examine the […]
Strike Selection Using Technical Analysis and Market Assessment
Stock and option selection are 2 of the 3-required skills essential to successful covered call writing (position management is the 3rd). There is no one factor that will dictate our choices but rather a mosaic of bits of information which will lead us to the best choices. In this article, I will discuss two of […]
Technical Charts: A Picture is Worth 1000 Words- A Real-Life Example with The Wendy’s Company (NASDAQ: WEN)
Technical analysis is one of the 3 screens we use for stock selection when selling options. The other two are fundamental analysis and common-sense principles (like minimum trading volume). In August 2019, Nick wrote to me about a trade opportunity he thought he missed with WEN. He attached a technical chart followed by a question. […]
Comparing Call and Put Strategies with Paylocity Holding Corporation (NASDAQ: PCTY)
Covered call writing or selling cash-secured puts… which is the best strategy? Well, they both offer great opportunities to generate cash-flow in a low-risk manner. I favor the former in normal to bull market environments and the latter in bear and volatile markets. On June 24, 2019, PCTY passed our rigorous screening requirements to earn […]
Creating “Dividends” for Non-Dividend Stocks: A Real-Life Example with PAYC
Covered call writing can be beneficial to us in a variety of circumstances. This article will highlight how this strategy can be implemented to create a dividend-like cash flow for stocks that currently offer no dividend income. This can be particularly useful for those who will only purchase dividend stocks and miss out on other […]
Evaluating Stock Purchase Price and Breakeven When Rolling Out-And-Up
When we write a covered call, our breakeven is stock purchase price – entire call premium. If we buy a stock for $48.00 and sell an option for $2.50, the breakeven is $45.50. In June 2019, John shared with me a series of trades he executed with Planet Fitness, Inc. (NYSE: PLNT) where he wrote […]
Combining In-The-Money Strikes and Stock Dividends to Provide Protection in Bear Markets + Holiday Discounts
When establishing our covered call writing trades, we must factor in current market conditions to either add protection in bear and volatile environments or to take advantage of normal to bull market scenarios. On May 17, 2019, Mauricio sent me a diagrammatic strategy proposal that would lower the breakeven using an in-the-money (ITM) strike as […]
Podcast
- 68. Volatility A Friend or Enemy to Covered call Writers and Put Sellers?
- 67. Should We a Short Put to Help Fund a Collar Trade?
- 66. Comparing the Cost-To-Close Covered Call Trades with Time-Value Return Goals
- 65: The 20%/10% Guidelines for Covered call Writing and Selling Cash-Secured Puts
- 64. Creating Dividend Like Income for Non Dividend Stocks
- 63. Rolling Decisions on Expiration Friday
- 62. Should I Unwind My Covered Call Trade 1 Week Prior to Contract Expiration?
- 61. Realized Versus Unrealized Capital Gains (Losses) for Covered Call Writing
- 60. Combining ITM Call Strikes & Stock Dividends to Protect in Bear Markets
- 59. ANALYZING 2 Month and 4-Day Covered Call Trades
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