When we sell cash-secured puts, we are seeking to generate cash flow or to buy securities at a discount. It is generally written that the maximum return for these trades is the put premium. This article will demonstrate how multiple income streams can be achieved by implementing our exit strategy arsenal and, thereby, achieve higher […]
Exercising Call Options to Capture Dividends: A Reasonable Action or Investor Error?
Dividend capture is the main reason for early exercise of our covered call writing trades. More specifically, ex-dividend dates are the times most susceptible to early exercise and having our shares sold at the strike price. This article will analyze the profitability or lack thereof of taking such action. On July 3, 2022, Graham shared […]
Calculating Mid-Contract Put-Selling Trade Status + A New Covered Call Writing Strategy Coming Soon
After entering our put-selling trades, we can calculate the current status of our trades mid-contract with a few simple entries into our Trade Management Calculator. In this article, a real-life cash-secured put example with Bristol-Myers Squibb Comp. (NYSE: BMY) will be highlighted. Hypothetical examples of winning and losing trades will be detailed on the spreadsheet. […]
Calculating Mid-Contract Covered Call Writing Trade Status: A Real-Life Example with Bristol-Myers Squibb Comp. (NYSE: BMY)
After entering our covered call writing and put-selling trades, we can calculate the current status of our trades mid-contract with a few simple entries into our Trade Management Calculator. In this article, a real-life covered call writing example with BMY will be highlighted. Hypothetical examples of closing winning and losing trades mid-contract will be detailed […]
Reverse Covered Call Writing: A Reasonable Bear Market Strategy? A Real-Life Example with SPDR S&P ETF Trust (NYSE: SPY)
Covered call writing is defined as first purchasing or already owning the underlying security and then selling the corresponding call option. By doing so, we are protected; we know our cost-basis. A BCI member proposed to me an extreme bear market strategy where a deep out-of-the-money (OTM) call is sold first and if the stock […]
The Significance of Breakeven When Constructing Our Poor Man’s Covered Call (PMCC) Trades: A Real-Life Example with International Business Machines Corp. (NYSE: IBM)
The PMCC Strategy involves buying LEAPS call options (expirations 1 – 2 years out) and selling short-term call options against the long position. The technical term is a long call diagonal debit spread. In our BCI methodology, the trade construction must meet a required trade initialization formula where the difference between the 2 strikes + […]
Entering and Adjusting Our Covered Call Trades Using the BCI Trade Management Calculator: A Real-Life Example with WBA
Entering, managing and archiving our covered call writing and put-selling trades are critical to our overall success as well as allowing us to learn and benefit from our investment history. To demonstrate how to achieve a high level of organization and management of our trades, this article will highlight a real-life series of trades with […]
20%/10% Guidelines: “Hitting a Double” in the Same Day: A Real-Life Example with Consumer Staples Select Sector SPDR (NYSE: XLP)
After entering our covered call writing trades, we immediately enter our 20%/10% BTC (buy-to-close), GTC (good-until-cancelled) limit orders. If and when these thresholds are reached (resulting from share price decline) are short calls will be closed (bought back). At that point, we can plan our next steps to mitigate losses or turn losses into gains. […]
Why Did Option Value Decline After Stock Price Accelerated? A Real-Life Example with United Health Group Inc. (NYSE: UNH)
We, as covered call writers and sellers of cash-secured puts, are on the sell-side of options. Every so often, I receive interesting emails with educational value from members who buy options. On 4/21/2022, Kevin shared with a trade he executed with UNH where share value went higher after purchasing a call option, but the value […]
Evaluating Pre- and Post-Market Opening Calculations; A Real-Life Example with The Simply Good Foods Company: (Nasdaq: SMPL)
Preparing for our initial covered call writing and cash-secured put trades starts pre-market. After developing a watchlist of eligible securities, we turn to the option-chains to determine if initial time-value returns align with our stated goals. Market-makers will be a bit hesitant to publish bid-ask spreads that are in our best interest until they can […]
Podcast
- 104. Special 1 Time Dividends and Contract Adjustments
- 103. The Collar Strategy Using Long-Term Put Expirations
- 102. Analyzing Market Assessment Based on Portfolio Setup
- 101. Covered Call Writing: "Hitting a Double" on the Last day of a Contract
- 100. Analyzing LEAPS for The Poor Man's Covered call Strategy (PMCC)
- 99. Anatomy of a Reverse Stock Split
- 98. Analyzing LEAPS Options for the Poor Man's Covered Call
- 97. Managing Our Poor Man's Covered Call Trades When Share Price Drops Substantially
- 96. Protecting Our Covered Call Trades: Protective Puts and In-the-Money Strikes
- 95. Covered Call Writing to Generate Premium and Dividend Income
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