Selling ITM covered calls is a defensive approach to the strategy; selling OTM covered calls is a more traditional or aggressive perspective. In this article, a series of trades I executed with Wheaton Precious Metals Corp. (NYSE: WPM) are analyzed. The initial trades were defensive in nature (ITM) and for the next contract expiration I moved to a traditional approach (OTM).
Real-life example with WPM (3 ITM strikes)
- 1/26/2026: WPM trading at $152.79
- 1/26/2026: STO 1 x 1/30/2026 $146.00 call at $8.13
- 1/26/2026: STO 1 x 1/30/2026 $144.00 calls at $9.70
- 1/26/2026: STO 1 x 1/30/2026: $142.00 call at $11.00
- 1/30/2026: All precious metal stocks crashed as a reaction to the nomination of the new Fed Chair
- 1/30/2026: WPM closed below all ITM strikes; all expired worthless and 300 shares were retained at a cost basis of $143.11 (ouch)
- 2/2/2026: I still liked WPM; considered Friday an over-reaction
- 2/2/2026: WPM trading at $131.87
- 2/2/2026: STO 3 x 2/6/2026 $140.00 calls (OTM) at $1.06
WPM OTM call calculations
- Red circle: 5-day trade
- Yellow cell: Breakeven price points (at the time of the latest trade)
- Brown cell: Initial 5-day returns
- Green cell: Annualized initial returns
- Purple cell: Upside potential, if shares move up to or beyond the $140.00 call strike))
- Pink cell: Dollar amount of premium collected
- Red cell: $ amount of upside potential
Final OTM results after expiration of the 2/6/2026 contracts
WPM closed on expiration Friday at $135.98. Here are the final results using the BCI Trade Management Calculator (TMC):
- Red arrow: Exit strategy selected
- Blue arrow: Price of WPM at expiration
- Green cells: Final realized option profit per-share, for 300 shares and % return
- Brown cells: Final unrealized share gain per-share, for 300 shares and % return
- Pink cells: Combined realized & unrealized total dollar profit and total % return
Discussion
The unexpected market reaction to the Fed Chair nomination resulted in an unrealized ITM loss. The ensuing OTM covered call trade resulted in an unrealized (shares not yet sold) gain. My plan is to continue writing covered calls, since the next earnings report is scheduled for 3/16/2026 and will not interfere with continuing cash flow from these trades. Not all trades will be winning ones. Understanding the reason(s) for losses and knowing how to mitigate will, ultimately, result in superior trading results.
________________________________________________________________________________________________________________
***For 19 years I have been fulfilling my promise to share losing, as well as winning trades. These trades are examples of how to mitigate trades that turn against us. Not all trades will be winners. By mastering all aspects of option trading, there will be substantially more winners than losers, especially when losers are reduced and winners are enhanced.
_________________________________________________________________________________________________________________
Alan Ellman’s Complete Encyclopedia For Covered Call Writing- Classic Edition
Over 500 pages packed with solid information, no useless filler material
151 charts and graphs most of which are in color for better visualization
Chapter outlines to summarize the material located in each chapter.
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:
Hi Alan,
Thanks for your presentation yesterday, you and Barry did a fantastic job. As an FYI, I am currently based in Australia so another big thank you for running the show in your evening/my morning. Much better than my trading in the very small hours of the Aussie day!
I have already benefited from the educational books on CCW and CSP’s plus paid for the calculators etc. I’m keen to receive your stock/ETF weekly/monthly reports via the annual premium membership.
Many thanks.
Lawrence, Sydney, Down-under
New Quasar Markets video
1. MoneyShow Masters Symposium Las Vegas
Tuesday July 21, 2026
Caesars Palace Hotel, Las Vegas
Title: The Put-Call-Put (PCP) or Wheel Strategy
Subtitle: Generating cash flow & buying shares at a discount using covered call writing and cash-secured puts
Description:
Selling stock options is a proven way to lower our cost-basis and beat the market on a consistent basis. Two such low-risk strategies are covered call writing and selling cash-secured puts. This presentation will detail how to incorporate both strategies into one multi-tiered option-selling strategy where we either generate cash-flow or buy stock at a discount. I refer to this as the Put-Call-Put (PCP) Strategy, also referred to as the wheel strategy.
The basics and pros and cons are discussed as well as a real-life example and introduction into the BCI Trade Management Calculator (TMC). This seminar is appropriate for those who look to generate modest, but repeatable, returns which will enable us to beat the market on a consistent basis while focusing on capital preservation.
2. Mad Hedge Investor Summit
Wednesday September 16, 2026
12 PM ET – 1 PM ET
The Collar Strategy: Covered Call Writing with Protective Puts
Protecting covered call trades from catastrophic share loss
Protect our covered call trades by purchasing protective puts. This results in lower risk transactions, with lower, but still significant option returns. This is the strategy Bernie Madoff pretended to use. He called it the split strike conversion strategy, but it was simply a collar. The covered call sets a max gain and the protective put guarantees a maximum loss.
Topics discussed
- What is the collar strategy?
- Uses for the collar
- Entering a collar trade
- Option basics for calls
- Option basics for puts
- Real-life example with NVDA
- What is an option-chain?
- Real-life example using the BCI Trade Management Calculator (TMC)
- Strategy pros & cons
- Event offer
- Q&A
Registration link to follow.
3. Toronto Money Show
September 24 – 25, 2026
MaRS Center, Toronto Canada
4. Orlando Money Show
October 5 – 7, 2026
Hilton Orlando Lake Buena Vista
Details to follow.
5. American Association of Individual Investors: NYC Chapter
Date and time to be confirmed.
6. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery
Saturday January 23, 2027
Zoom presentation
All-day paid event
All-day event hosted by 3 experts:
- Dr. Alan Ellman (options)
- Dr. Eric Wish (technical analysis)
- Les Masonson (ETFs)
Hosted by TraderLion University
Details to follow.
Begin additional segments text here (like testimonials, events, etc.)
