Posted on July 21, 2012
by Alan Ellman
in Covered Call Exit Strategies, Option Trading Basics, Stock Option Strategies
Exit strategy execution is critical to maximizing our covered call writing success. But what approach should we use if the underlying equity declines in value? Many investors use a stop loss order when a stock they own declines in value. The question then becomes is this the best approach for covered call writing? There are […]
Posted on June 18, 2012
by Alan Ellman
in Option Trading Basics, Options Calculations, Stock Option Strategies
Whenever a study is performed on covered call writing a stock is selected and the nearest out-of-the-money (O-T-M) strike price is sold. This is repeated over and over and then the results are compared to the overall market performance. The usual conclusion is that covered call writing slightly outperforms the overall market but with much […]
Posted on June 16, 2012
by Alan Ellman
in Exchange-Traded Funds, Stock Option Strategies
As covered call writers we strive to generate monthly cash flow by selling call options in a conservative, low-risk environment. This approach is quite appealing to many retail investors but many look to fund managers to take advantage of this great strategy. As a result there are now 31 closed-end funds that use covered call […]
Posted on June 2, 2012
by Alan Ellman
in Stock Investing, Stock Option Strategies
When studying covered call writing we learn to master stock investing as well as option trading basics. Then we become elite investors by focusing in on the inter-relationship between the two. In this regard, a story most of us have been following the past two weeks has been the initial public offering (IPO) of Facebook […]
Posted on May 5, 2012
by Alan Ellman
in Option Trading Basics, Options Calculations, Stock Option Strategies
In the BCI methodology for covered call writing we use predominantly 1-month options. There are times, however, where we find cash in our accounts (mid-contract) that is inactive. This may be due to closing a position early either because the share price declined significantly or accelerated exponentially. Perhaps Grandma gave you a generous birthday present. […]
Posted on March 31, 2012
by Alan Ellman
in Stock Option Strategies, Technical Analysis
Stock options strategies, including covered call writing, factor in a multitude of parameters including fundamental and technical analysis as well as many common sense principles. In my books, DVDs and seminars I discuss determining market tone before making any investment decisions. One of the main factors I utilize in this determination is the VIX. The VIX […]
Posted on February 11, 2012
by Alan Ellman
in Option Trading Basics, Stock Option Strategies
Fundamental analysis, technical analysis, common sense principles and calculations are all critical considerations when selling stock options the Blue Collar way. Since this is my first article written on our newly enhanced web site (hope you like it!) I thought it appropriate to use a real-life example to review the basic tenets of our BCI […]
Posted on January 28, 2012
by Alan Ellman
in Stock Option Strategies
So you sold an options contract for $380 and generated a 3.5% 1-month return. Did you ever wonder how the market determined the value of that options contract to be $380? The simple equation that most of us know and understand is the following: Option premium = Intrinsic Value + Time Value To review, let […]
Posted on January 21, 2012
by Alan Ellman
in Stock Option Strategies
Mid-Contract Unwind: The major concern for covered call writers is the stock price dropping in value. The option premium collected is money in the bank. Most of our exit strategies are designed to mitigate these losses and turn losses into gains. However, as Blue Collar Investors we should also be prepared to act if the opposite […]
Posted on January 14, 2012
by Alan Ellman
in Stock Option Strategies
With expiration Friday and earnings season fast approaching our common sense principles (see chapter 8 of my latest book) become even more important. Never sell a covered call option with an upcoming earnings report is a critical BCI rule. But what if you own a stock and love it! Hopefully, your admiration for the stock […]
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