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Is There Less Risk Using Deep In-The-Money Long Calls versus Covered Call Writing?

“There is less risk using deep in-the-money (ITM) long calls than buying stock and selling the corresponding short calls”. That is the case John made to me when I received his email in January 2018. As an example, John used a $100.00 stock and a call premium of $9.00. The basis of his theory was […]

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Rolling Down Our Put Positions: When and Why?

  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 value declines to more than 3% below the strike price. […]

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covered call writing calculations

Evaluating a Portfolio from a Numerical Perspective

When we formulate our covered call writing and put-selling portfolios, we are basing our decisions on non-emotional sound fundamental, technical and common sense principles. Similarly, we can analyze a portfolio and determine the investor’s stock and overall market assessments. On November 17, 2017, Carl sent me a list of his very first covered call writing […]

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American Depository Receipts and Special 1-Time Cash Dividends/ Discount Coupons for New Book & Calculators

When viewing option chains while crafting our covered call writing portfolios, from time-to-time we will see unusual strike prices. These anomalies are usually associated with various corporate events that result in option contract adjustments. Such events include stock splits, mergers and acquisitions and the one highlighted in this article, special 1-time cash dividends. In July […]

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calculating covered call writing returns

Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money Strikes

The 3 required skills for covered call writing and selling cash-secured puts are stock selection, option selection and position management. This article will use real-life examples highlighting the first 2 of these skill sets in a bull market environment.   Article assumptions and guidelines Portfolio is set up in a bull market environment Target goals […]

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dividend capture and covered call writing

Combining Dividend Capture with Covered Call Writing: Pros and Cons

Why not use covered call writing with only dividend-bearing stocks to generate three income streams; option premium, share appreciation to the (out-of-the-money) call  strike plus the dividend itself? This article will explore the pros and cons of this approach to covered call writing.   Strategy theory We screen for stocks that have ex-dividend  dates  (also […]

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selling cash-secured puts

The Mysteries of a Put Sale

On 8/19/2017, Ron sent me an email detailing a cash-secured put trade he initiated in a virtual account. I saved the email to use in an article because I felt it would be instructive on several fronts.   Ron’s trade with Abiomed, Inc. (NASDAQ: ABMD)   8/10/2017: Sell August 17 $155.00 put (sale price not […]

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Technical Analysis Impacting Stock Eligibility for Option-Selling

Fundamental analysis, technical analysis and common sense principles comprise the 3-pronged approach used in the BCI methodology for screening for option-selling candidates. Technical analysis is the factor that changes most frequently and is the main reason a stock will get “bumped” from our Premium Stock Reports. In our 11/10/2017 Premium Stock Report, MKS Instruments (NASDAQ: […]

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covered call writing exit strategies

Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks

One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For example, we may buy back the October $50.00 call option and then sell the November $55.00 call option. We would consider such action if the expiring strike […]

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covered call writing strike price selection

In-The-Money Call Strikes: Intrinsic Value Protects Time Value

Strike price selection is one of the 3 required skills for covered call writing and put-selling. When we sell in-the-money call options we are protecting our positions to the downside while still generating the time value initial profits we have established in our strategy goals. In return, we are relinquishing any opportunity to generate additional […]

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