Comments on: Covered Call Writing With Protective Puts: A Proposed Strategy https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/ Learn how to invest by selling stock options. Fri, 28 Nov 2014 16:53:30 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21320 Fri, 28 Nov 2014 16:53:30 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21320 Email Qs about puts:

1: Is exercise automatic if strike is in-the-money at expiration?

Generally, yes. Check with your broker to see if they have any other guidelines but this is the norm…same as selling calls.

2- If shares are “put” to us, can they be sold immediately?

Yes

(sorry I lost the name of the person who sent this email…seminar travel and new book has been dominating my time).

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21315 Fri, 28 Nov 2014 12:18:38 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21315 In reply to Martin Reynolds.

Martin,

I wish it were that simple but the reality is that we are in 3 positions with the proposed strategy: Long the stock and put and short the call. Now owning a put does not preclude the need for position management…situations can change. For example, the price of the stock may increase significantly which may lead to the mid-contract unwind exit strategy. If we close the long stock and short call, what do we do with the long put? Perhaps we should sell it and generate whatever time value premium still exists? Maybe hold it if you think there could be a price decline. Perhaps share appreciation is slow but steady and you no longer feel the need for this “insurance” When do we sell the put?

If there is a price decline, put value will accelerate. Do the math…perhaps we should close all positions and move to a stronger financial soldier?

As share price changes, do we re-set the strike of the put?

The fact remains that just because we bought a 6-month put does not mean that we can’t re-evaluate the situation and choose not to remain in this trade for the full time frame…This is why I don’t like taking a long-term position on any one stock in the cc writing and put-selling accounts in my portfolio. It’s not a bad approach, I just think we can do better with short-term obligations.

Many can “juggle” 3 balls instead of 2…we must make sure that we are one of those people before committing to a particular strategy.

SO GLAD TO LEARN OF YOUR RECENT SUCCESS SELLING PUTS!

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21295 Wed, 26 Nov 2014 23:02:23 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21295 To all members:

This Friday we will begin taking pre-orders for my latest book, “Selling Cash-Secured Puts” All those on our mailing list (all premium members + those receiving our weekly newsletters are on the list…if not, you can sign up on the top right side of blog page) will be receiving a discount promo code. Premium members will also receive their member discount.

I should have the first several hundred copies in my possession by mid-December when shipping will begin…whew…just in time for holidays.

I started writing this book a year and a half ago…hope you enjoy and benefit from it.

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21294 Wed, 26 Nov 2014 22:56:22 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21294 Premium members:

This week’s 8-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options as well as the implied volatility of all eligible candidates.

For your convenience, here is the link to login to the premium site:

http://www.thebluecollarinvestor.com/member/login.php

NOT A PREMIUM MEMBER? Check out this link:

http://www.thebluecollarinvestor.com/membership.shtml

Alan and the BCI team

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By: Martin Reynolds https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21289 Wed, 26 Nov 2014 14:12:30 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21289 Alan,
When you speak of also having to manage the long put position, please could you elaborate? Wouldn’t the put be a set and forget for six months?
I am looking forward to reading your new book for Christmas. I have already started selling some puts on weekly options, rather than selling in the money calls. So far so good, but I’m sure I will learn much from your latest book,
Regards,
Martin

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By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21283 Tue, 25 Nov 2014 20:41:09 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21283 An observation:

On the recent number of analysts raising the price target for Apple computer: This information is about as useful and daring as a weatherman’s forecast for a 50% chance of rain.

Happy Thanksgiving to one and all.

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/covered-call-writing-with-protective-puts-a-proposed-strategy/#comment-21274 Mon, 24 Nov 2014 21:12:11 +0000 http://www.thebluecollarinvestor.com/?p=10474#comment-21274 In reply to Gary.

Gary,

We are in a long stock and short option position. Owning the stock establishes our cost basis and gives us protection against catastrophic loss if share value appreciates dramatically. Therefore, if we are considering closing a position, the short call must be closed first. This is where our 20%/10% guidelines kick in (see the exit strategy chapter of the Complete Encyclopedia…or in our DVD Program). Now once the short call is closed, selling the stock may not be the best choice. It may be re-selling the same option or rolling down.

The takeaway here is that you don’t want to sell the stock before closing the option position (most brokerages will not allow this anyway for our own protection).

Alan

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