Mar 6, 2021 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies
When we initiate a covered call trade by first buying a stock and then selling a call option, our cost-basis, in the BCI methodology, is the lower of the stock price or strike price. If we sell an in-the-money (ITM) strike, we deduct the intrinsic-value component of...
Feb 27, 2021 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, paper trading, Stock Option Strategies
Covered call writing is associated with 2 legs: we are long the stock and short the call option. If we add a protective put, we have converted the covered call trade to a collar trade which has both a floor (put strike) and a ceiling (call strike). The traditional...
Feb 20, 2021 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
The Poor Man’s Covered Call (PMCC) is a covered call writing-like strategy where deep in-the-money LEAPS options are used in lieu of long stock positions. Short-term out-of-the-money call options are sold against the long position. The technical term is a long...
Feb 13, 2021 | Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
One of our covered call writing exit strategies is rolling-out-and-up. We use this position management technique when our short call is in-the-money (ITM) as expiration approaches and we decide to retain the shares for the next contract month (or week). For example,...
Jan 23, 2021 | Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
Strike price selection is the 2nd of our 3-required skills for covered call writing and selling cash-secured puts. I am frequently asked which Delta to use as a guide to a specific strike price. In this article, we will review the factors that guide us to the most...
Jan 16, 2021 | Covered Call Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies
Exit strategy execution for covered call writing and put-selling is the 3rd required skill needed to achieve the highest returns (stock and option selection are the other two). Knowing how and when to implement these position management trades will have a major impact...
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