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Large Returns Can Be Enticing: We Must Do the Math to Make Sensible Trades + Free Webinar Registration Link + New Book & Calculator

Our covered call writing and put-selling trades initially generate cash into our brokerage accounts. The amount of cash can be impressive on the surface but we must break down the components of these premiums, calculate our potential returns and measure the risk inherent in these contract obligations. In November of 2021, Peter wrote me and […]

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Covered Call Writing Strike Selection in Bull, Bear and Neutral Markets: A Real-Life Example with Crocs, Inc. (Nasdaq: CROX) + April Free Webinar Registration Link

Covered call writing strike selection will vary from investor-to-investor. There is no single parameter that will guide us to the most appropriate strikes for our portfolios. Factors that must be considered are personal risk-tolerance, initial time-value return goal range and overall market assessment.   Personal risk-tolerance The type of underlying securities we use and the […]

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What is a Delta-Neutral Portfolio?: A Real-Life Example With InMode Ltd. (Nasdaq: INMD) + Free Webinar Registration Links

Many portfolio managers will seek Delta-neutral portfolios to mitigate directional or market risk. This article will explain how these experts calculate their positions to achieve this goal. To simplify the details, a single security will be used but the concepts apply to total portfolio positions as well.   Definitions Delta: The amount an option value […]

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Collar Trades: The Rationale for Maximum Gains and Losses

Covered call writing trades have 2 legs: the long stock position and the short call. The collar trade adds a third leg, the long protective put. The calculations for potential trade maximum gain or loss can be confusing. This article will break down the mathematics and provide a rationalization for these computations.   The 3 […]

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Generating a 3-Income Stream Put Trade: A Real-Life Example with ZIM Integrated Shipping Services Ltd. (NYSE: ZIM)

We have all read that when we sell a cash-secured put, the maximum return is the put premium. Is that true 100% of the time? Enter our exit strategy arsenal. On 9/27/2021, Richard shared with me a series of put trades he executed with ZIM. It involved an initial put sale plus 2 BTC and […]

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Making a Great Covered Call Trade Even Better: A Real-Life Example with Revolve Group, Inc. (NYSE: RVLV)

Covered call writing trades, when structured and managed properly, can result in impressive short-term and annualized returns. Such was the case with Art who shared with me a series of trades he executed with RVLV in August – September 2021. The returns were outstanding and enhanced via exit strategy execution. This article will analyze the […]

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The Poor Man’s Covered Call LEAPS Selection: A Real-Life Example with SPDR S&P 500 ETF Trust (NYSE: SPY)

Before initiating a poor man’s covered call trade (PMCC), we must first master all aspects of the strategy including understanding the pros and cons inherent in this system. Once we have made a decision that this strategy is appropriate for our portfolios, the next step is to analyze our initial trade structuring calculations. We want […]

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Using Implied Volatility to Establish Reliable Trading Ranges for Our Option Contracts

PLEASE SEE A REVISION TO THIS ARTICLE AT THE END OF THE POST. I MADE AN ERROR AND REVERSED THE NUMERATOR AND DENOMINATOR IN ONE OF MY CALCULATIONS. THE CONCEPTS ARE ACCURATE BUT THE MATH NEEDED TO BE TWEAKED. I have written several articles on the use of VOLQ (Nasdaq-100 Volatility Index) to establish a […]

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When to Roll Options on Successful Trades: A Real-Life Example with iShares MSCI India ETF (BATS: INDA)

Exit strategies for covered call writing are an inherent part of our BCI methodology. They allow us to mitigate losses, enhance gains and even turn losses into gains. There will be times when find ourselves in situations where it not 100% clear whether we should pull the trigger on one of our exit strategies versus […]

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Understanding 1-Time Special Cash Dividends and Our Current Trade Status: A Real-Life Example with OMF

Contract adjustments will change the parameters of our covered call writing and put-selling trades but will not result in any trade loss or gain. The Options Clearing Corporation (OCC) will make alterations to our option contracts such that buyers and sellers of calls and put are made whole after the corporate event. On August 6, […]

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