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 determine market direction and flow. Therefore, the calculations we run pre-market will typically be different after the market opens than prior to traditional trading hours. Although different, they will usually be “in the same ballpark”, so this exercise is useful and timesaving. I recommend entering initial trades between the hours of 11 AM ET and 3 PM ET to avoid early morning and late afternoon institutional computerized trading. This article will highlight statistics taken prior to market open on 4/25/2022 and at 13:30 PM ET on that same day using The Simply Good Foods Company (Nasdaq: SMPL).

SMPL pre-market calculations using the BCI Trade Management Calculator (trading at $42.25)

SMPL: Calculations Before Market Opens on 4-25-2022

• Brown cells: $40.00 ITM strike (initial return 1.88%, 26.32% annualized, 5.33% downside protection)
• Green cells: $45.00 OTM strike (initial return 1.30%, 18.27% annualized, 6.51% upside potential)

SMPL post-market opening calculations using the BCI Trade management Calculator (trading at $41.91)

SMPL: Post-Opening Calculations on 4-25-2022

• Brown cells: $40.00 ITM strike (initial return 2.35%, 32.00% annualized, 4.56% downside protection)
• Green cells: $45.00 OTM strike (initial return 1.43%, 20.10 annualized, 7.37% annualized)

Comparison spreadsheet

SMPL: Calculations Differences Pre- and Post-Market Opening

• The post-opening 26-day and annualized returns were higher for both the ITM and OTM strikes
• The downside protection for the ITM strike was lower for the post-opening calculations
• The upside potential was higher for the post-opening OTM strike

Discussion

Pre-market calculations are useful preliminary exercises when creating our trade structuring decisions. Final decisions are made during normal market trading hours when option pricing and bid-ask spreads provide the highest degree of accuracy.

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Upcoming events

To request a private webinar for your investment club, hosted by Alan & Barry: [email protected]

1.Money Show Orlando live event (This weekend: Sunday, Monday & Tuesday)

October 30th – November 1st, 2022

OMNI ORLANDO RESORT AT CHAMPIONSGATE

Visit Alan, Barry and members of the BCI team at Booth # 415

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Sunday, October 30, 2022, at 5:00 pm – 5:45 pm EDT
Covered Call Writing: Multiple Applications Based on Current Market Conditions

Monday, October 31, 2022, at 4:30 pm – 6:30 pm EDT
Selling Cash-Secured Puts: Detailed Start-to-Finish Six-Part Program*

Masters Class

Comprehensive Course on Selling Cash-Secured Puts

Detailed start-to-finish 6-part program

This presentation will provide all the information, with real-life examples, necessary to master the strategy of selling cash-secured puts. The program is divided into 6 sections:

• Section I:
  • Option basics
• Section II
  • Traditional put-selling
• Section III
  • PCP (wheel) strategy
• Section IV
  • Buy a stock at a discount instead of a limit order
• Section V
  • Ultra-low-risk put/Delta strategy
• Section VI
  • Ultra-low-risk put/Implied volatility strategy

This presentation was developed to benefit both beginner and experienced option traders and will provide all the information needed to initiate the strategy and elevate returns to the highest possible levels.

45-minute presentation

Covered Call Writing: Multiple Applications Based on Current Market Conditions

Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ)

Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are:

• Normal to bull markets
• Bear and volatile markets
• Low interest-rate environments

A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances.

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2. Money Show’s Post-Election Strategies Virtual Expo

November 10th

2:10 ET – 2:40 ET

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Portfolio Overwriting

Increasing Profits in Our Buy-And-Hold Portfolios Using Covered Call Writing 

Our buy-and-hold portfolios in non-sheltered accounts are generating 8% – 10% per year. Can we increase these yields by selling stock options while, at the same time, dramatically decreasing the probability of our shares being sold to avoid potential tax implications? The answer is a resounding “yes”.  Portfolio Overwriting is a strategy that can benefit millions of investors seeking to enhance portfolio returns using a low-risk covered call writing-like strategy.

Topics discussed

• Brief review of covered call writing
• Option basics
• What is an option-chain?
• Option selection
• Calculating covered call returns: Real-Life examples
• Portfolio overwriting defined
• Pros and cons of portfolio overwriting
• Why early exercise is so rare
• Rolling options
• Role of dividends
• Locating ex-dividend dates
• How to avoid early exercise
• Real-life examples with calculations
• BCI Portfolio Overwriting Calculator
• Summary

Date, time & registration link to follow

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Thursday December 8th (tentative date; time and topic to follow)

Free virtual webinar

4. Long Island Stock Traders Meetup Group (Private webinar)

Thursday February 16,2023

7:30 PM ET- 9 PM ET

A real-life example with a $100k ETF Select Sector SPDR portfolio
Covered call writing is a low-risk option-selling strategy that generates weekly or
monthly cash flow. This presentation will demonstrate how to implement this
strategy using a database of only 11 exchange-traded funds for a 1-month option
contract cycle. These are real-life trades taken directly from one of Dr. Ellman’s
portfolios with screenshots verifying each trade. A final monthly contract result
compared to the performance of the S&P 500 will be calculated.

Topics included in this webinar:

 What are the Select Sector SPDRs?
 How to establish a covered call writing portfolio
 What is the role of diversification?
 What is the role of cash allocation?
 Calculating initial returns
 Analyzing each trade in the monthly contract
 Final results
 Next steps

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