Stock Option Strategies – The Blue Collar Investor https://www.thebluecollarinvestor.com Learn how to invest by selling stock options. Sat, 23 Mar 2024 09:21:23 +0000 en-US hourly 1 Annualized Returns for Weekly and Monthly Options https://www.thebluecollarinvestor.com/annualized-returns-for-weekly-and-monthly-options/ https://www.thebluecollarinvestor.com/annualized-returns-for-weekly-and-monthly-options/#comments Sat, 23 Mar 2024 09:21:22 +0000 https://www.thebluecollarinvestor.com/?p=24093
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Over the years, I have presented the pros & cons of weekly options versus monthly expirations for our covered call writing and put-selling trades. One of the advantages to weekly expirations is a greater annualized return, in most cases. In this article, I will detail a real-life example with Pinterest, Inc. (NYSE: PINS), a stock on our premium watchlist on 12/4/2023.

PINS: Weekly and Monthly option-chains on 12/4/2023

  • PINS was trading at $34.18 on 12/4/2023
  • The weekly (12/8/2023) expiration, $35.00 call had a published bid price of $0.21
  • The Monthly (1/5/2024) expiration, $35.00 call had a published bid price of $0.89
  • Both option-chains showed narrow bid-ask spreads, so we will use the published bid prices in our calculations

PINS: Weekly & Monthly calculations using the BCI Trade Management Calculator (TMC)

  • Notice I used an expiration date of 12/10/2023 (red arrow), instead of 12/8/2023. This way the weekend is incorporated (7 days, not 5 days) into the annualized return and will not inflate the practical returns
  • The initial time-value returns for the Weekly option is 0.61%, 32.04% annualized based on a 7-day trade
  • The initial time-value return for the Monthly option is 2.60%, 28.80% annualized based on a 33-day trade
  • The weekly option generated a greater annualized return by 3.24%

Discussion

We can all be quite successful with our covered call writing and put-selling trades using either Weekly or Monthly expirations. Both works well. This article used a real-life example with PINS to demonstrate one of the Weekly advantages … greater annualized returns in most scenarios.



The Poor Man’s Covered Call Online Video Course with Downloadable Workbook

Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. It involves a long stock position (we buy the stock) and a short option position (we sell the call option). The PMCC strategy replaces the long stock positions with long call positions, typically deep in-the-money long-term expiration options known as LEAPS. Because long options cost less than stocks, we are investing less money and the return on our capital increases. As with all strategies, there are pros and cons that must be mastered to determine if this is a proper strategy for our personal risk-tolerance and return goals. This program will highlight in detail:

  • PMCC definition
  • Pros and Cons
  • Risk/reward profile
  • Best stocks and ETFs to consider
  • How to construct a PMCC trade
  • Hypothetical example
  • Multiple real-life examples
  • The BCI PMCC Calculator
  • Option Greeks
  • Position management
  • Rolling LEAPS

Click here for more information and a video.


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Alan and Barry, 

Enjoyed the seminar! Thank you, Alan & Barry, for your great efforts!

Bill in Omaha

Upcoming events

1. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Ultra Low-Risk Approaches to Covered call Writing and Selling Cash-Secured Puts

Adding Delta and Implied Volatility to existing defensive concepts

CLICK HERE TO REGISTER

Covered call writing and selling cash-secured puts are low-risk, option-selling strategies focused on generating cash-flow. Our trades can be structured to represent aggressive or defensive postures or somewhere in between.

This presentation will detail how to structure our trades to decrease risk, particularly in bear and volatile market conditions while still generating significant returns. It will also be of interest to investors who have a low personal risk-tolerance but still want to generate higher than risk-free returns.

Both Delta (an option Greek) and implied volatility will be spotlighted, and real-life examples will be utilized to demonstrate the process of establishing these conservative trades, while still allowing us the potential to generate significant annualized returns.

A comparison of these ultra-low risk returns will be compared to those of traditional option-selling, using real-life examples.

At the end of the online seminar, Alan & Barry will respond to all questions related to covered call writing and cash-secured puts.


REGISTRATION DETAILS

Zoom Meeting ID, passcode, and direct link will be sent via email to those who register using the link below on Wednesday, April 10, 2024, the day before our online, education event goes live. A final reminder that also includes the Zoom login information will be emailed about 2 hours before the event begins. Only registrants receive a day-of-event reminder.

For those who register you will also receive the following benefits:

  • Unique opportunity to ask questions during the Live Q&A that will immediately follow the presentation.
  • Unlimited access to a replay of the webinar (link sent via email shortly after the event has concluded).
  • A bonus gift (emailed along with the replay link) of BCI’s highly popular, 40-page e-book, entitled…

Selling Cash-Secured Puts for Beginners The E-Book

Investing To Generate Monthly Cash Flow

CLICK HERE TO REGISTER

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

2. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

3. Coming Soon From BCI…

· The Blue Collar Investor Conservative Credit Spread Trading System

· We Are Introducing Our Credit Spread Trading Methodology Following BCI Conservative Trading Principles

· The System Includes:

o Bull Put Calculator

o Bear Call Calculator

o Expected Price Movement Calculator – That Will help To Determine High Probability Short Leg and Long Leg Positions of The Credit Spread

o An Extensive Credit Spread Trading Journal

· A New Approach to User Guides…Detailed Context Specific Cell Descriptions and Guidelines…For Both Data Entry and Calculated Results

If you are interested in learning more or want early access to our new system, please send an email to Barry Bergman at:

barry@thebluecollarinvestor.com

Alan speaking at a Money Show event********************************************************************************************************************
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Using Technical Analysis to Enhance Our Covered Call Writing and Cash-Secured Put Trades https://www.thebluecollarinvestor.com/using-technical-analysis-to-enhance-our-covered-call-writing-and-cash-secured-put-trades-2/ https://www.thebluecollarinvestor.com/using-technical-analysis-to-enhance-our-covered-call-writing-and-cash-secured-put-trades-2/#comments Sat, 09 Mar 2024 10:26:00 +0000 https://www.thebluecollarinvestor.com/?p=24014
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In our BCI methodology, there is a 3-pronged approach to our stock screening process:

  • Fundamental analysis (sales & earnings growth)
  • Common-sense principles (minimum trading volume, avoiding earnings reports & more)
  • Technical analysis (reading a price chart)

This article will focus on technical analysis and will utilize real-life examples with bullish, mixed and bearish price charts.

Technical indicators used in the BCI screening process (feel free to use your favorites)

  • Exponential moving averages (measures trend)
  • MACD histogram (measures trend & momentum)
  • Stochastic oscillator (measures momentum)

Bullish Price Chart: Dorian LPG Ltd. (NYSE: LPG)

  • Exponential moving averages (top) are ascending, with the shorter-term 20-day EMA above the longer-term 100-day EMA
  • MACD histogram (blue bars) are above the zero line and ascending
  • Stochastic oscillator (black line) is ascending
  • Volume (green circle) is not weakening
  • This is a strong security from a technical perspective and would consider it for our portfolios and favor more bullish positions

Mixed Price Chart: Dorian LPG Ltd. (NYSE: LPG)

  • Exponential moving averages (top) are ascending, with the shorter-term 20-day EMA above the longer-term 100-day EMA. Price bars are beginning to decline (#1)
  • MACD histogram (blue bars) are above the zero line but descending (#2)
  • Stochastic oscillator (black line) is starting to turn down (#3)
  • Volume (green circle) is not weakening, confirming the other indicators
  • This is a mixed technical mosaic and would not eliminate the stock from consideration, but would tend to guide us to favor defensive positions (in-the-money call strikes, for example)

Bearish Price Chart: Everest Group, Ltd (NYSE: EG)

  • Exponential moving averages (top) are flattening and turning down, with the price bars moving below the 20-day exponential moving average (top purple arrow)
  • MACD histogram (blue bars) have moved below the zero line
  • Stochastic oscillator (black line) is descending significantly
  • Volume (green circle) is not weakening, confirming the other bearish indicators
  • This is a bearish technical mosaic and would eliminate the stock from consideration

Discussion

Technical analysis is one of our 3-pronged approach to stock screening. Bullish and mixed price charts are acceptable, but bearish price charts eliminate the security from consideration. We also use technical analysis to help guide us to strike price selection.

NOTE: BCI premium members do not have to do the technical analysis discussed in this article. Our team does that for you.



Selling Cash-Secured Puts Basic and Advanced Principles

Selling Cash-Secured Puts is a 6-part Video Series + downloadable workbook. All aspects of Put-Selling, including stock selection, option selection and position management. A huge section on exit strategies and a deeper dive into ultra-low risk approaches to selling cash-secured puts have been added to previous versions of this course. The Companion Workbook contains 111 all-color pages of all charts, graphs and slides. Download Table Of Contents (PDF)

This course contains 6- parts in the video course:

Section I: Option basics (definitions and foundational information)
Section II: Traditional put-selling (stock & option selection + position management)
Section III: PCP (wheel) strategy (adding covered calls to selling cash-secured puts)
Section IV: Buy a stock at a discount instead of a limit order (buy a stock at our target price or get paid not to buy the stock)
Section V: Ultra-low-risk put/Delta strategy (High probability, low-risk trades)
Section VI: Ultra-low-risk put/implied volatility strategy (High probability, low-risk trades)


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Alan,

I’m sure I speak for many others in the BCI community, when I say, “Please don’t ever retire”. I have always done well, but the BCI methodology and tools have increased my trade success rate and my knowledge of the market.

Let’s go 2024.

John

Upcoming events

1. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Register here for free.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

Register here for free.

2. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

3. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

4. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event********************************************************************************************************************
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Rolling-Out Decisions for Our Covered Call Writing Trades: 3 Strategies Analyzed https://www.thebluecollarinvestor.com/rolling-out-decisions-for-our-covered-call-writing-trades-3-strategies-analyzed/ https://www.thebluecollarinvestor.com/rolling-out-decisions-for-our-covered-call-writing-trades-3-strategies-analyzed/#comments Sat, 02 Mar 2024 10:34:00 +0000 https://www.thebluecollarinvestor.com/?p=23967
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When our covered call writing strikes are expiring in-the-money (with intrinsic-value), our shares will be sold at the strike price. We may opt to retain the shares by rolling the option to a later date. This article will highlight 3 paths we can take and discuss the factors that will guide us to our final decisions.

Hypothetical rolling scenario

  • 9/18/2023: 100 x BCI purchased at $48.00
  • 9/18/2023: STO 1 x 10/20/2023 $50.00 call at $1.50
  • 10/20/2023: BCI trading at $52.00
  • 10/20/2023: If we take no exit strategy intervention, shares will be sold at $50.00 (allowing exercise)
  • 10/20/2023: Cost-to-close the 10/20/2023 $50.00 call is $2.05
  • 10/20/2023: Bid price for the 11/17/2023 $50.00 call is $3.50 (to roll-out)
  • 10/20/2023: Bid price for the 11/17/2023 $55.00 call is $1.95 (to roll-out-and-up)

Factors that determine which path to follow

  • Do we want to retain the shares for the next contract cycle (including no upcoming earnings report)?
  • Will the rolling calculations align with our pre-stated initial time-value return goal range (2% – 4% per-month, as 1 example)?
  • Are we bullish (favor rolling out-and-up) or bearish (rolling-out) on the overall market?

Allowing exercise calculations using the BCI Trade Management Calculator (TMC)

  • Section 1 shows trade entries
  • The Trade Management Calculator (TMC) shows a 33-day trade, if taken through contract expiration (red circle)- section 2
  • The initial time-value return is 3.13%, 34.56% annualized (brown cells)- section 2
  • By “allowing exercise”, shares are sold at $50.00 (red arrow)- section 3
  • Section 4 shows a final realized 33-day return of 7.29%

Rolling-out to the 11/17/2023 $50.00 strike (defensive exit strategy)

  • The net premium is $1.45 ($3.50 – $2.05)- red circle
  • The initial time-value return is 2.90%, 40.71% annualized, based on a 26-day trade (brown cells)
  • There is no upside potential or downside based on a $50.00 price (green cells)
  • Keep in mind, that shares are actually $52.00 at the time of the roll, but only worth $50.00 to us, due to our contractual obligation to sell at $50.00

Rolling-out-and-up to the 11/17/2023 $55.00 strike (aggressive exit strategy)

  • The net premium is -$0.10 ($1.95 – $2.05)- red circle
  • The initial time-value return is -0.20%%, -2.81% annualized, based on a 26-day trade (brown cells)
  • There is 10% upside potential based on a $50.00 price (green cell)
  • Keep in mind, that shares are actually $52.00 at the time of the roll, but only worth $50.00 to us, due to our contractual obligation to sell at $50.00

Discussion

When our covered call writing strikes are expiring in-the-money, there are several exit strategy paths we can take. This article highlighted allowing exercise, rolling-out and rolling-out-and-up. Mastering and focusing in on the factors discussed will guide us to the appropriate path to take.

There is another way to address rolling calculations, using the TMC, where the BTC debit is incorporated into the first contract cycle. I will address this in a future article.



Covered Call Writing Alternative Strategies

Portfolio Overwriting– using stocks in buy-and-hold portfolios.
The Collar Strategy– using protective puts.
The Poor Man’s Covered Call– using LEAPS options.
———-
Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies.

Click here for more information and purchase link.


Alan presenting at the Stock Trader’s Expo/ Money Show at the Paris Hotel in Las Vegas

Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Thanks Alan (and Barry) for last night’s session.

I thought it was clear, for what it’s worth.

I have been using the CEO approach since early last year and it’s doing great (except for the 3 weeks I spent in Morocco – should have not set up trades – I know better).

Take care.

Frank

Upcoming events

1. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Register here for free.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

Register here for free.

2. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

3. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

4. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event********************************************************************************************************************
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The Importance of the 3% Guideline When Selling Out-Of-The-Money Cash-Secured Puts https://www.thebluecollarinvestor.com/the-importance-of-the-3-guideline-when-selling-out-of-the-money-cash-secured-puts/ https://www.thebluecollarinvestor.com/the-importance-of-the-3-guideline-when-selling-out-of-the-money-cash-secured-puts/#comments Sat, 24 Feb 2024 16:34:44 +0000 https://www.thebluecollarinvestor.com/?p=23921
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On 10/20/2023, a BCI premium member shared with me a cash-secured put series of trades executed with Charles Shwab Corp. (NYSE: SCHW). Over the course of 9 months, SCHW dropped in price from approximately $83.00 to $50.87. This series of trades started by selling out-of-the-money (OTM) cash-secured puts which were exercised. The next 7 months involved writing (OTM) covered calls to help mitigate the severe share price decline. I was asked to analyze the trades and if continuing to write OTM covered calls was a viable solution to this losing scenario.

Overview of the SCHW trades

  • 1/13/2023: STO 2 x 3/17/2023 OTM $80.00 puts with SCHW trading at about $84.00
  • 3/17/2023: SCHW trading at approximately $57.50
  • 2 x $80.00 puts were exercised, and shares purchased at $80.00
  • Over the next 7 months OTM covered calls were sold on SCHW
  • On 10/20/2023, SCHW was trading at $50.87

Price chart summary of the SCHW trades

What is the BCI 3% guideline as it relates to selling OTM cash-secured puts?

If share price drops 3% or more below the OTM put strike, we close the put position and avoid the pain of further price decline. Of course, share price can recover, but do we want to take the chance on a security already under-performing our expectations? I submit, no. In the case of the original SCHW put trade, the threshold to close the put trade was $77.60 (3% below $80.00). This price point is 8.8% below the original price of the security ($84.00) when the put trade was initiated. Time to protect ourselves (aka bail).

A picture is worth 100 wordsComparison chart of SCHW versus the S&P 500

Of course, we are all much smarter looking back, but the graphic shows the type of scenario the BCI 3% guideline protects us from. Will this or any exit strategy benefit us 100% of the time? No, nothing works 100% of the time. However, it will protect us from catastrophic losses.

Discussion

The BCI 3% guideline is an excellent tool in mitigating substantial share price decline when selling OTM cash-secured puts. A plan must be in place prior to entering every trade, as how to take advantage of all exit strategy opportunities, whether it’s to mitigate losses or enhance gains.



Alan Ellman’s Selling Cash-Secured Puts

Using stocks and stock options to develop a low-risk, wealth-building strategy for retail investors. Selling puts is a strategy similar to, but not precisely the same as, covered call writing. Mastering either strategy is a huge opportunity for retail investors to secure our financial futures. Mastering both will allow us focus on the best investment choices depending on market conditions and personal risk tolerance.

FOR ADDITIONAL INFORMATION AND PURCHASE LINK, CLICK HERE.


Las Vegas Presentations

It was a real treat for me to meet so many members of our BCI community at my Stock Trader Expo seminars at the Paris Hotel in Las Vegas on Thursday and Friday. You made my days!

Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Customer Review for The Complete Encyclopedia for Covered Call Writing

D.B.

5.0 out of 5 stars Terrific resource.

Reviewed in the United States on December 19, 2022

Verified Purchase

Can take the beginner toward an intermediate to advanced process of covered calls and option investing. I have many books on investing, some with quite complex methodologies. This can definitely take you where you need to be to maximize potential profits with a step by step, illustrative manual. I am pouring through this, affirming much that I already know as well as advancing my education in this process. Readable…concise language. Highly recommend.

Upcoming events

1. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Free registration link to follow.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

2. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

3. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

4. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event********************************************************************************************************************

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Setting Up a Bullish Covered Call Writing Monthly Portfolio https://www.thebluecollarinvestor.com/setting-up-a-bullish-covered-call-writing-monthly-portfolio-2/ https://www.thebluecollarinvestor.com/setting-up-a-bullish-covered-call-writing-monthly-portfolio-2/#comments Sat, 17 Feb 2024 11:24:00 +0000 https://www.thebluecollarinvestor.com/?p=23868
click ↑ 4 Featured

This article will highlight one of the many ways we can establish a monthly covered call writing portfolio during bullish market conditions. We will utilize a hypothetical portfolio of $100k and use 5 different securities, 3 stocks and 2 exchange-traded funds (ETFs).

Premium Stock Report for the November 2023 contracts (10/23/2023 – 11/17/2023)

  • FUTU, ZS and JBL are eligible securities in 3different industry segments.
  • No earnings reports are due prior to expiration of the November 2023 contracts.
  • All have adequate option liquidity (open interest- OI).

ETF (Exchange-traded funds) Report for the November 2023 contracts (10/23/2023 – 11/17/2023)

  • FXN and XOP are the 2 top-performing ETFs the week prior to the start of the November 2023 contracts.
  • Both securities have out-performed the S&P 500 over both the 1-month and 3-month time frames.
  • Both he stock and ETF reports are included in our BCI premium membership.

Cash allocation spreadsheet

  • The final portfolio setup spreadsheet displays the # of shares to buy and contracts to sell, while allocating a similar amount of cash to each position.
  • There will be a cash balance of $1739.00 for potential exit strategy opportunities.

Initial portfolio and trade calculations using The BCI Trade Management Calculator

  • Initial time-value returns range from 1.37% to 4.09% for the 5 positions (brown cells).
  • Annualized initial returns range from 19.23% to 57.48% for the 26-day trades (brown cells).
  • These are initial returns. Final returns can be higher or lower.
  • Since all strikes used were out-of-the-money (OTM), upside potential ranged from 1% to 6.04% (green cells).

Discussion

Setting up a high-quality covered call writing portfolio, involves several considerations. Here are some:

  • Stock and ETF selection based on sound fundamental, technical and common-sense principles.
  • Adequate security diversification.
  • Adequate cash allocation.
  • Strike selection based on overall market assessment, personal risk-tolerance and chart technical parameters.

There are many other ways to establish our portfolios for each contract cycle. This article provided an example which utilized many of the critical principles we can employ to ensure the highest possible returns. Keep in mind, this publication did not address position management, the 3rd required skillset needed to achieve the highest possible returns.

Click here for a related video.



Stock Investing for Students: A Plan to Get Rich Slowly and Retire Young

This is Alan’s financial literacy book (not option-related), currently used in 4 universities in the US.

Self-investing starting at a young age can ensure a successful financial future and an early and comfortable retirement. So why is nobody doing this? The answer includes such factors as the social pressures facing our youth, certain pre-conceived ideas regarding our ability to successfully self-invest and the education or lack thereof needed to motivate our youth to undertake such a long-term project. The purpose of this book is to change that way of thinking and create a goal and a user-friendly methodology that will facilitate a plan which will allow you to retire financially secure at a relatively young age.

Click here for more information and purchase link.


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

(From Courtney after explaining the BCI PMCC trade initialization formula):

Hi Alan,

It finally clicked. This is what happened to me in December with SMH and X. They both accelerated rapidly and I’m going to close them out. I really like the PMCC method, since I have a smaller account but was a little foggy with calculating my [possible total profit available.

Thank you again for your guidance and support!

Courtney

Upcoming events

1. Las Vegas Money Show & Stock Traders Live In-Person Event

February 22 & 23, 2024

Paris Hotel

Thursday, February 22, 2024, at 4:55 pm – 5:25 pm PST

The PCP (put-call-put or “wheel”) Strategy

Friday, February 23, 2024, at 12:00 pm – 12:45 pm PST
Covered Call Writing: A Streamlined Approach

Register here.

2. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Free registration link to follow.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

3. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

4. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

5. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event********************************************************************************************************************
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Summarizing the Information in Our Premium Member Stock Reports https://www.thebluecollarinvestor.com/summarizing-the-information-in-our-premium-member-stock-reports/ https://www.thebluecollarinvestor.com/summarizing-the-information-in-our-premium-member-stock-reports/#comments Sat, 10 Feb 2024 11:21:00 +0000 https://www.thebluecollarinvestor.com/?p=23827
click ↑ 4 Featured

When we select a stock for our covered call writing or cash-secured put trades, one of the main resources we analyze in the BCI Stock Reports, crafted starting after market close on Fridays. The other main reports we provide to our members are the Exchange-Traded Fund (ETF) Reports and the Blue Chip (Dow 30) Reports. This article will provide an overview of the information found in our stock reports.

Real-life example with Vertex, Inc. (Nasdaq: VERX) from the report dated 10/6/2023- See video links at bottom of article

This image represents a small area within our 18-page report. Let’s review each column, left-to-right (Columns will be identified by title as they are difficult to read in1 single screenshot):

  • Symbol: Ticker symbol of the stock. Stocks in bold have the most bullish technical charts (both SMCI and VERX in this screenshot). See the chart below for an example of a bullish chart pattern
  • Company name:
  • Weekly rank or other resource: A number represents the ranking within the most recent IBD 50 ranking. “Other” represents a stock taken from the BCI database of stocks we have identified as potential option-selling candidates over the years. “PRW” represents stocks that have passed BCI screens in recent weeks. “BC20” are stocks from the IBD Big Cap 20 list. “SL” are stocks taken from the IBD Sector Leaders list.
  • Price: Price of the stock at the time the report was crafted
  • Industry Segment: Identifies the industry of that stock
  • Segment Rank: A = Top 20%; B = next 20% and so on
  • Pass Fundamental & Technical Screens: Have the highest ratings in all 6 categories of the IBD Smart
  • Mean Analyst Rating (MAR): Summary of all institutional analysts following that stock. 1 – 5, with 1 being the best and 5 the lowest. We only accept stock ranked 3 or lower
  • On balance Volume (OBV): Adds trading volume on “up” days and subtracts trading volume on “down” days to identify an institutional trend and interest in a stock. Arrows indicate a bullish, neutral or bearish trend
  • The next 3 columns relate to technical analysis. See the chart below
  • Beta: Relates historical volatility of the stock to the S&P 500 over the past 1 year
  • % Dividend Yield: Annual yield if a dividend is generated
  • ATM IV%: Implied volatility of the stock based on current option pricing in the marketplace. Higher IV means higher premiums but greater risk
  • NTM OI: Relates to option liquidity. Is open interest > 100 contracts?
  • Next ER: Date of upcoming earnings report based on studying multiple resources. This date can be updated by a company so must be rechecked by investors, if the date is close to a contract expiration date
  • Wkly Avail: Staes whether the stock is associated with weekly options, in addition to longer-dated expirations
  • # Wks On Run List: Stocks on our watchlist for multiple weeks are showing strength and staying power
  • Comments: Special notes, if applicable and also ex-dividend dates, when applicable

VERX technical chart on 10/6/2023

  • #1: The 20-day exponential moving average (EMA) is above the 100-day EMA. The OHLC bars ar at or above the 20-day EMA. This identifies a bullish trend
  • #2: The MACD histogram (blue bars) are above the zero-line. This suggests positive trend and momentum
  • #3: The stochastic oscillator (black line) is moving upward from the below the 20% line, indicating positive momentum
  • #4: Volume bars remain strong, confirming the bullish indicators and showing no sign of negative volume divergence, which would mean a bearish signal
  • Since all technical parameters used in our BCI methodology are bullish, VERX is posted in bold in the October 6 report

Discussion

The BCI Premium Member Stocks Reports consist of a significant amount of information analyzed from fundamental, technical and common-sense perspectives, which allows our members to make informed decisions regarding the underlying securities we use for our option-selling portfolios.

Detailed videos regarding BCI Premium Membership & Reports

BCI Reports

BCI Premium member Benefits



BCI Trade Management System: Calculator, User Guide & Exit Strategy Book Package

(Video will not play from this screenshot. Click the link below to watch the video)

This is the only spreadsheet in existence that allows the user to enter covered call writing and cash-secured put trades, receive initial trade and portfolio calculations, execute > 20 exit strategy trade adjustments and then calculate final post-adjusted trade and portfolio results. This is an absolute must for all covered call writers and sellers of cash-secured puts.

Click here for more information and to order this product.


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Alan!

You started me down the road to becoming a successful options investor so many years ago. I still have MUCH to learn and would highly value continued connections with you and BCI! Thank you again and again!!!

Randy

Upcoming events

1. Long Island Stock Traders Meetup Group (private investment club- Part I)

Thursday February 15, 2024

7:30 PM ET – 9:00 PM ET.

Club members only.

2. Las Vegas Money Show & Stock Traders Live In-Person Event

February 22 & 23, 2024

Paris Hotel

Thursday, February 22, 2024, at 4:55 pm – 5:25 pm PST

The PCP (put-call-put or “wheel”) Strategy

Friday, February 23, 2024, at 12:00 pm – 12:45 pm PST
Covered Call Writing: A Streamlined Approach

Register here.

3. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Free registration link to follow.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

4. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

5. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

6. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event********************************************************************************************************************

]]>
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Using Implied Volatility and the BCI Expected Price Movement Calculator to Avoid Exercise https://www.thebluecollarinvestor.com/using-implied-volatility-and-the-bci-expected-price-movement-calculator-to-avoid-exercise/ https://www.thebluecollarinvestor.com/using-implied-volatility-and-the-bci-expected-price-movement-calculator-to-avoid-exercise/#comments Sat, 03 Feb 2024 11:30:18 +0000 https://www.thebluecollarinvestor.com/?p=23778
click ↑ 4 Featured

When we write covered call options and sell cash-secured puts, our goal is to generate cash-flow in a low-risk manner. Frequently, a second important goal is to avoid exercise of the options, which means avoiding the strikes from expiring in-the-money (ITM) or with intrinsic-value. In the case of covered call writing, this will avoid selling our shares and in the cash of cash-secured puts, it means avoiding having the shares put to us. This article will utilize at-the-money (ATM) implied volatility (IV) and the BCI Expected Price Movement Calculator to result in ultra-low-risk trades that generate lower but still significant premium returns, with an approximate probability of 84% of avoiding exercise (expiring ITM).

What is the BCI Expected Price Movement Calculator?

A spreadsheet that generates an approximate trading range for a specific contract cycle, using implied volatility statistics and a conversion formula inherent in the spreadsheet. The formula will recalibrate the published IV annualized stats into one specific for the contract cycle being traded.

Why 84% approximate probability of success?

  • IV is based on 1 standard deviation (approximate 68% probability of falling into the range)
  • Of the 32% that falls outside the 1 standard deviation range, 16% is to the downside and 16% to the upside
  • This results in approximate 84% probability that stock price will not move above or below the 1 standard deviation range
  • For example, if we do not want exercise of a call option, our risk is the 16% to the right of the graphic (green arrow)

Real-life example with Intel Corp. (Nasdaq: INTC)

  • The ATM $38.00 strike (INTC trading at $37.88) has an IV of 31%
  • This is an annualized IV based on 1 standard deviation

Expected Price Movement Calculator

  • If we were seeking an OTM call option, with an approximate 84% probability of avoiding exercise, we would choose a $41.00 or $42.00 strike
  • If we were seeking an OTM put option, with an approximate 84% probability of avoiding exercise, we would choose a $34.00 or $35.00 strike

Discussion

Upper and lower limits of a trading range for our underlying securities can be achieved with an approximate 84% probability of success, using IV and the BCI Expected Trading Range Calculator. This strategy approach is particularly useful when seeking to generate ultra-low risk with lower, but still significant, option returns.



The Blue Collar Investor’s Guide to:

Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts

This book will detail how to enter, manage and calculate trade adjustments for all market conditions. After we select the underlying security and sell the corresponding option, we immediately move into position management mode. There are over 20 exit strategies defined, as well and when and how to implement these plans.

The BCI Trade Management Calculator facilitates the analysis of each exit strategy by showing initial trade entries, initial trade calculations for both each individual trade as well as that of the entire portfolio. From there we learn how to enter our trade adjustments and finally to calculate trade and total portfolio post-adjustment results.

For information & purchase link, click here.


Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Alan,

I have been a premium member since 2018 and have had 2 or 3 questions / issues over that time and am always amazed and delighted at how quickly you respond to resolve the issue.  You are really first rate.

Thanks, 

Michael

Upcoming events

1. Long Island Stock Traders Meetup Group (private investment club- Part I)

Thursday February 15, 2024

7:30 PM ET – 9:00 PM ET.

Club members only.

2. Las Vegas Money Show & Stock Traders Live In-Person Event

February 22 & 23, 2024

Paris Hotel

Thursday, February 22, 2024, at 4:55 pm – 5:25 pm PST

The PCP (put-call-put or “wheel”) Strategy

Friday, February 23, 2024, at 12:00 pm – 12:45 pm PST
Covered Call Writing: A Streamlined Approach

Register here.

3. Mad Hedge Investor Summit

Tuesday March 12, 2024

11 AM ET – 12 PM ET

Free registration link to follow.

Covered Call Writing Dividend Stocks to Create a 3-Income Strategy

Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.

Topics covered in this webinar include:

  • Strategy analysis
  • Option basics
  • What is covered call writing?
  • Dividend distribution
  • Stock selection
  • Option selection
  • Trade management

Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.

Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.

A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.

4. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

5. BCI-Only Webinar

Thursday April 11, 2024

8 PM ET – 9:30 PM ET

Topic, description and free registration information to follow.

All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.

6. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event*********************************************************************************************************************

Begin additional segments text here (like testimonials, events, etc.)

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