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technical analysis

An Annualized Return of 5000% and Feeling Miserable: Interpreting Our Covered Call Trades

Whether we are using covered call writing, put-selling or any other investment strategy, investor interpretation of results is an interesting topic to analyze. Is the glass half-full or half-empty? On October 5th, 2018, Gene wrote me about two covered call positions he was holding and expressed deep concern over the status of those trades. This […]

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strike price selection

Strike Price Selection When Selling Cash-Secured Puts: A Real-Life Example with WWE

Strike price selection is one of the 3-required skills when selling covered calls or cash-secured puts. This article will highlight the choices and rationale for our decisions when selling puts for World Wrestling Entertainment, Inc. (NYSE: WWE) on 9/24/2018.   Bullish price chart for WWE     Option-selling lowers our cost-basis and therefore we make […]

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covered call writing with VIX

VIX Covered Call Writing: Selling Options Against Market Volatility

Traditional covered call writing involves first buying a stock (or exchange-traded fund) and then selling a corresponding call option. The result of the initial trade is to generate cash flow from the option sale and lower our cost basis on the stock side. Based on member feedback, there has been a growing interest in writing […]

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covered call writing trades

Timing Our Covered Call Trades: Joanna’s Tale of “DOH”

When entering our covered call trades with new positions, we buy the stock and immediately sell the option. This can be accomplished by legging-in or using a buy-write combination form. This is an important guideline because we will be assured of capturing our initial time value return goals. On August 6th, 2018, Joanna shared with […]

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technical analysis and covered call writing

Managing News-Driven Gap-Downs: A Real-Life Example with Stamp.Com

Earnings reports represent the greatest risk for price gap-downs for our covered call writing and put-selling stocks. Problem solved…we avoid earnings reports. However, from time-to-time unexpected negative news will be reported that will cause significant price decline. On July 25th, 2018, Earl shared with me a trade he initiated with Stamps.com (NASDAQ: STMP) and was […]

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stock dividends

Converting Non-Dividend Stocks Into Dividend Stocks

Generating a consistent cash flow from stock dividends is an appealing benefit from owning shares for many investors. Stock ownership, in these scenarios, can create two income streams, one from price appreciation and the other from quarterly dividends. However, not all securities have associated dividends and some investors will bypass these stocks even if they […]

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S&P 500 chart

Why Covered Call Writing Outperforms the Overall Market

Why should we spend the time to educate ourselves on how to implement and manage covered call writing trades? The answer is simple: Once the 3 required skills (stock selection, option selection and position management) are mastered, we will put ourselves in a position to beat the market on a consistent basis. This article will […]

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covered call writing exit strategies

“Hitting a Double” Calculations with The Ellman Calculator

One of the BCI exit strategies that helps distinguish us from all other covered call writers is known as “hitting a double” We use this position management technique when share value declines such that option value drops to 20% (in the first half of a monthly contract) or 10% (in the second half of a […]

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covered call writing and earnings reports

Managing Earnings Reports on Long-Term Holdings

Never sell a covered call or put option when there is an earnings report due to be reported prior to contract expiration. I have repeated this rule so many times over the years because I want our members to avoid the losses I incurred back in the 1990s before I realized how important it was […]

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BCI Collar Calculator

Protective Puts and the Collar Strategy: Selecting the Best Strike Prices/ Last Chance for Holiday Orders

Covered call writing, when combined with protective puts, is known as the collar strategy. The maximum gain is established by the short call strike while the maximum loss is defined by the long put strike. For example, if a stock is purchased for $48.00 per share and the $50.00 call is sold while the $45.00 […]

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