In previous publications, laddering covered call strikes with the same expiration dates was discussed. This article will address scenarios when the ITM strikes remain ITM and the OTM strikes remain OTM at expiration. A real-life example with Alamos Gold Inc. (NYSE: AGI) will be analyzed.
AGI 5-day trade
- 12/15/2025: Buy 400 x AGI at $38.08
- 12/15/2025: STO 1 x $40.00 OTM call at $0.20
- 12/15/2025: STO 3 x $37.00 ITM calls at $1.45
- Pre-stated initial weekly time-value return goal range is 1/2% to 1% for both ITM & OTM strikes
Initial Covered Call Trade Calculations: BCI Trade Management Calculator (TMC)
- Red oval: 5-day trade
- Yellow field: Breakeven price points
- Brown cells: Initial time-value returns for the OTM $40.00 strike
- Purple cell: Additional upside potential for the OTM call strike (potential 2nd income stream from share appreciation)
- Pink cells: Initial time-value returns for the ITM $37.00 strike
- Blue cell: Downside protection of the ITM time-value return
Trade status after Expiration on 12/19/2025
- AGI closed at $38.48
- This is $0.40 above the price at trade entry
- I allowed the 300 shares to be exercised at $37.00 for a net gain of $111.00
- I am holding 100 shares at an unrealized gain of $40.00 and an option realized gain of $20.00
- Total 5-day realized + unrealized gain = $171.00 = 82% annualized
Discussion
Just as we have the opportunity to use different strikes for the same underlying security with the same expiration dates, we also have the flexibility to allow or prevent exercise and assignment of our shares. I could have bought back and rolled the ITM strike prior to expiration but decided to allow exercise and retain the remaining 100 shares to then write a covered call the following week. In essence, I had 4 successful contract trades and took some money off the table for the next contract cycle.
Stock Repair Calculator
What is the stock repair strategy?
- Own shares at a price higher than current market value (unrealized loss)
- Willing to forego potential profit in exchange for lowering the breakeven price point
- Not willing to add additional funds to the current losing position
- Instead of buying shares at the lower price to “average down”, an at-the-money (near-the-money) call option is purchased and funded by selling 2 out-of-the-money call options
- 2 long positions (stock and ATM or NTM call)
- 2 short positions (OTM calls covered by long positions)
- This action will lower the breakeven price point
- The strategy does not protect against additional downside loss
- The strategy does cap the upside
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1. BCI Educational Webinar #10: The Put-Call-Put (PCP) or “Wheel Strategy”
Thursday May 14, 2026, at 8 PM ET (LAST CHANCE TO REGISTER)
Using both covered call writing & cash-secured puts in a multi-tiered option selling strategy. A 68-day real-life example taken from one of Alan’s portfolios will be analyzed.
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2. Mad Hedge Investor Summit
June 3, 2026
12 PM ET – 1 PM ET
Covered Call Writing
Uncovering a 3rd Income Stream in Our Investment Portfolios
Increasing profits and avoiding tax issues using stock options
You have owned shares of stock in your non-sheltered accounts for many years. Share value has been appreciated significantly over time. This has put a smile on your face. Many of these securities have also generated dividend income. This, too, has pleased you. However, there is a 3rd income stream that you can activate right now, leveraging these same stocks, using a strategy known as covered call writing.
This is a low-risk option selling strategy analogous to generating rental income with a real estate investment property. Yes, renting out your stocks for limited periods. We have 2 goals: generate a 3rd income stream + retain the underlying shares to avoid negative capital gains issues.
This presentation will analyze how to implement this form of covered call writing, known as Portfolio Overwriting, always with capital preservation in mind.
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site.
Look in the “resources/downloads” section (right side) and scroll down to “B”.
Alsan & the BCI team
Hi Alan,
I am making nice returns with the CC and CSP trades since about one year.
The question that keeps in my mind is: What to do with a stock that’s not on the list anymore, went down and has earnings next cycle?
In my case this question is about FIVE Below. I bought the shares at 231 in march 25th. Made 888 on the April contract (230C) and again 386 on the may contract (240C).
Shares are trading at 208.
I sold the shares yesterday to free up the cash and got into a new CSP (ROAD) that’s generating about 1% for this week.
Any recommendations on my approach with these type of shares like FIVE?
Kind regards and thanks for al your help.
Bas
Bas,
I used to struggle with this issue as well, but over time I realized that the answer was an easy one.
Let’s say we buy 100 shares of a stock @ $100.00 and generate option premiums over several contract cycles. Then share price declines to $90.00. Here’s my philosophical, but practical, approach:
We shouldn’t care about the stock at all. It’s the cash we have invested in that security that is our true concern.
We started with $10k worth of stock, but now we have $9k in share value.
The question we ask ourselves is “where is that $9k best placed?” In that same stock or a better performer?
I have no loyalty to the stock but tons of concern for the cash.
Another way to view the situation: Would I buy this stock today at the current price?
Alan
Thanks Alan,
That’s some praktical advice. I like that thoughts and know that it is the total portfolio that matters most, not the individual stock.
A side note: This is why position management is so important as well…
Have a nice day (evening now in NL).
2 New Reports / Sample trade/ Register for our free BCI webinar tomorrow/ New video
Premium Members:
1. This week’s ETF Report has been uploaded to your member site. Login to the member site and scroll down on the left side to access the report.
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3. I’ve attached to premium member emails a 2-contract, 5-day defensive cash-secured put trade, with TTMI, an elite-performing stock at the time of the trade. I executed this trade on 5/11/2026, for the 5/15/2026 expiration.
TTMI closed at $168.82 today, up $4.82 from trade entry. The current price is well above the $140.00 put strike and $29.32 above breakeven with 2 trading days remaining to expiration. As always, I remain prepared to execute exit strategies, if those opportunities arise. I’m feeling pretty good about this one.
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Wishing you the best results,
Alan & the BCI team
Hi Alan,
I sold the ROAD put at 130 for this Friday. The 3% guideline sits at 126,10 and when it is not recovering with the opening this afternoon, what to do best?
I am wondering: Why not roll the strike down to the 125 put in the June expiration?
Or just let assignment happen and wait for the stock to recover a bit?
What are your thoughts on this? If the stock drops below the 3% and i need to buy it back there is a realized loss?
Kind regards and it’s so great how you help out with your answers:).
Bas
Bas,
Rolling-down is one of our exit strategy choices to avoid exercise, as is simply closing the option position.
Now, rolling-down will result in an option debit, so the question is; do we want to remain in a position that has turned against us?
By closing, we limit our losses and use the cash to enter a new position and start the mitigation process.
Rolling down will decrease the chance of exercise and cost less than closing alone, but it will work against us if share price continues to decline in value.
Alan