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Delta and covered call writing

Hitting a Double with News-Related Market Overreactions

Stock selection, option selection and position management are the 3 required skills for covered call writing and put-selling. One of our go-to exit strategies is “hitting a double” where we buy back the original option sold if share price declines and then re-sell that same option as share price recovers. Stock prices whipsaw and that […]

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stock selection for covered call writing

Protecting Unrealized Profits When Share Price Accelerates

Covered call writing dilemmas can frequently result from positive circumstances. In August 2017, Vincent shared a trade he executed where an out-of-the-money strike was sold and share price had moved up significantly and was approaching the strike price. This means that Vincent realized an initial option premium return plus had an unrealized share appreciation component […]

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coverred call writing asnd technical analysis

Stocks Moving On and Off our Premium Stock List: A Technical Perspective

When we select stocks for covered call writing or selling cash-secured puts we factor in fundamental, technical and common-sense screens (like minimum trading volume). This screening process is the foundation of our Premium Stock Reports. Frequently we will notice stocks removed from these lists only to return shortly thereafter. The reason for these whipsaws are […]

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covered call writing and stock splits

Stock Splits Can Cause Panic: Relax, All is Well

You write a covered call on a stock trading at $165.00 and sell the $170.00 call option. A few days later, your stock is trading at $28.00 and the strike you sold no longer appears on option chains. What do we do? Panic? Curl up into the fetal position and feel sorry for ourselves? Research […]

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volatility-based ETNs

Market Volatility and VIX-Based Exchange-Traded Notes

Our covered call writing and put-selling portfolios have been significantly impacted the past few weeks from extreme market volatility. In addition to rising wages, inflation concerns and projected interest rate hikes, volatility based exchange-traded notes are also playing a role in the market decline.    What is the VIX? The VIX is also known as […]

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covered call writing calculations

Seeking the Highest Option Premiums is a Losing Strategy

One of the common mistakes made by covered call writers and put-sellers is to make investment decisions based primarily on the highest premium returns. Certainly, we all want to generate the highest levels of success but only when factoring in the risk we will be incurring. This article will look at high premium returns from […]

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covered call writing exit strategies

Rolling Option Considerations: A Real-Life Example with BEAT

Exit Strategies for covered call writing is the third required skill for successful implementation of this strategy (stock selection and option selection are the first two). This is also known as position management. One of the most common situations we face each month is when the strike price we initially sold is expiring in-the-money (stock […]

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stop losses for covered call writing

Setting Stop Loss Orders for Covered Call Writing

After entering our covered call writing trades, we immediately go into position management mode. For most of us who started our stock investment careers buying and selling stock, this may include setting stop loss orders to mitigate losses when share price declines. For example, if we purchase a stock at $40.00, we may set a […]

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managing covered call trades

Managing Winning Trades for High Implied Volatility Stocks

Covered call writing and cash-secured put-selling are conservative strategies geared to retail investors who have capital preservative as a key strategy requirement. When we use high implied volatility underlying securities the strategy will have a broader range of risk-reward exposure. This article was inspired by Randy P. who had outstanding results using Applied Optoelectronics Inc. […]

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The Collar Strategy from a Delta Perspective

When covered call writing is combined with protective puts the strategy is known as the collar strategy. The short call places a ceiling on gains and the long put represents a floor protecting losses. The two option positions should result in a net credit. Typically, out-of-the-money calls and puts are selected. Covered call writing and […]

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