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Multiple Applications of the Mid-Contract Unwind (MCU) Exit Strategy: A Real-Life Example with Super Micro Computer, Inc. (Nasdaq: SMCI)

Covered call writing exit strategies allow us to mitigate trade losses and enhance trade profits. On 11/30/2022, Paul shares with me a series of trades he executed with SMCI where a trade turned against him, and he wasn’t sure how to enter it into the BCI Trade Management Calculator. Both legs of the covered call trade were closed with the intention of using the freed-up cash to mitigate the initial losses.


What is the mid-contract unwind (MCU) exit strategy?

This is a covered call writing exit strategy where both legs of the trade are closed (short call first, then the sale of the stock). It is typically used when share price accelerates and the time-value component of the option approaches $0.00. After closing the entire trade, the cash is used to establish a new income stream.

MCU can also be used when share price declines and we decide not to create a scenario where we can “hit a double” (re-sell the same option) or roll-down to a lower strike with the same expiration date. Both are viable alternatives to MCU in this example. MCU means closing both legs of a covered call trade prior to contract expiration.


Paul’s SMCI trades

  • 11/28/2022: Buy 200 x SMCI at $94.60
  • 11/28/2022: STO 2 x 12/16/2022 $95.00 calls at $4.65
  • 11/30/2022: BTC the 12/16/2022 SMCI $95.00 call at $1.51
  • 11/30/2022: Sell 200 x SMCI at $87.42


Entering & calculating initial & final trades


SMCI: MCU Exit Strategy


  • Blue cells: Trade entries
  • Green oval: Initial and annualized time-value returns based on a 19-day trade
  • Red arrow: 7% guideline is the depreciation price point to consider selling the stock after closing the short call
  • Purple arrow: MCU exit strategy is selected when closing both legs of a covered call trade prior to contract expiration
  • Brown cells: Combined stock and option debit in $ and % stats after executing the MCU exit strategy
  • Blue arrow: A note is made in the TMC Trade Journal regarding the reason for closing the covered call trade



When closing the 2 legs of a covered call trade, we enter the exit strategy as the mid-contract unwind whether it is because share price accelerated exponentially or declined precipitously. In both cases, we close the short call first and then sell the underlying security.


Premium Member Benefits Video: This is a great time to join our premium member community with its stock screening and educational (over 250 videos) benefits. We offer more benefits than ever before. For information, click here.

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Your generous testimonials

Over the years, the BCI community has been incredibly gracious by sending our BCI teaemail testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Hi Alan,

For 3 months now (since 12/09/22) I’ve been a BCI member and so far, I’ve already had some solid financial success to speak about.

So far, I’ve used the mid-contract unwind twice, entered new positions, rolled down once, and added a collar on 1 tech position to help me sleep better at night…. It’s been financially profitable 👍

Your program is the real deal! I’m very grateful!




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Wednesday May 17th at 3:55 PM ET

Covered Call Writing: A Streamlined Approach (similar to the recent BCI webinar)

Introducing the CEO Strategy for option traders with challenging, busy schedules.

Register for free here.


2. American Association of Individual Investors; Austin-San Antonio Chapter

Private webinar for chapter members only.

Tuesday May 30, 2023, at 8 PM ET

For investment groups seeking private webinars, send an email request to:


3. Mad Hedge Investor Summit

June 14th at 11 AM ET – 12 PM ET

Exit Strategy Choices After Exercise of Cash-Secured Puts 

When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. Typically, we only sell puts on elite-performers that we would be agreeable to own in our portfolio.

This presentation will analyze 4 potential exit strategy opportunities to consider should the put option be exercised. Information on the following strategies will be highlighted:

  • Selling the stock
  • Holding the stock in our long-term buy-and-hold portfolio
  • Write a covered call (PCP or “wheel” strategy)
  • Implement the Stock Repair Strategy

In addition to these strategies, the following topics will also be included in the webinar:

  • Option basics for selling cash-secured puts
  • Option basics for covered call writing
  • Real-life examples
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  • Event super discount offer

There will be information offered to all levels of options trades, from beginners to advanced.

Registration link to follow.


4. Your Mid-Year Portfolio Review Virtual Expo 

June 27th – 29th, 2023

Ultra-Low Risk Approaches to Covered call Writing and Selling Cash-Secured Puts

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5. Wealth365 Investor Summit

July 10th -11th

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.

Overview of BCI’s 3 best educational packages

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Alan speaking at a Money Show event***********************************************************************************************************************

About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

18 Responses to “Multiple Applications of the Mid-Contract Unwind (MCU) Exit Strategy: A Real-Life Example with Super Micro Computer, Inc. (Nasdaq: SMCI)”

  1. Victor May 13, 2023 1:12 am

    Hello Alan and Barry:

    I have seen that in some ITM covered calls trades I have placed that when the price of the underlying equity goes up in a meaningful amount the combined profit of the open positions of the short call and long the underlying, is higher than the maximum ROO to be received by the trade if the option expires ITM.

    I find this a bit confusing, which I take advantage of, but it shows that the maximum profit of an ITM covered call is not the ROO but you can capture some of the upside if the underlying rises more than the loss of the short call. In this case a MCU is warranted and another trade be placed.

    If you could please give me some feedback on this because I haven’t read it on the books or videos that you have.


    • Alan Ellman May 13, 2023 7:06 am


      The maximum return on an in-the-money call strike is the initial ROO (return on option), assuming no exit strategy intervention.

      The reason is that when we decide to buy-to-close the short call of the ITM strike, we pay the intrinsic-value (amount the strike is below market value) + some time -value component. At that point, we own the shares at a higher price than the previous strike, but it will cost us the time-value cost-to-close. Let’s set up a hypothetical example:

      Buy 100 x BCI at $48.00.

      STO 1 x $45.00 call at $4.50.

      ROO = [($4.50 – $3.00)/ ($48.00 – $3.00)] = 3.3%, using the intrinsic-value component of the premium to “buy-down our cost-basis)

      BCI movers up to $60.00.

      At this point, we have an unrealized max return of $1.50 or 3.3%

      The $50.00 call has an “ask” price of $10.20 ($10.00 of intrinsic-value + $0.20 of time-value).

      Now, without buying back the short call, our shares can only be worth $50.00, our contract obligation to sell. By buying back the call, our shares are now worth $60.00, current market value, so we are +$10.00 on the stock side.

      However, it cost us $10.20 per-share to close the short call, leaving us with a debit of $0.20 per-share or $20.00 per-contract.

      This is why, exit strategies aside, the max return for ITM call strikes is the initial ROO.

      With exit strategies … MCU or simply hoping share price continues to accelerate, there will be opportunities to create 2nd or 3rd income streams.


  2. Joanna May 13, 2023 2:15 am


    I wrote you the other day about Google, and which ticker is better to which you said “I doesn’t matter…pick one and go with it”(basically).

    Well, it so happens that I entered a bunch of trades on Monday, one of which was GOOG, and it’s turning out to be my best play.

    This brings me to a dilemma. I have mastered all the trade management strategies except for this one. I’m not sure how others feel about it, but it pains me to make decisions on this for whatever reason. Here’s the setup:

    BTO 100 shares GOOG on 5/8 at 107.12
    STO 6/2/23 call strike = 109, option premium = 2.29 Today (6/11/23), GOOG = 118.10, Option premium = 10.08

    My 3 choices for managing this trade are:

    1.Do nothing.
    2.Buy back the call and sell another one in the same contract cycle at a higher strike price 3.Employ the MCU

    I like GOOG, so I will eliminate the MCU right off the bat. I think what bothers me most is solidifying the loss on the call option if I choose to roll. (2.29-10.08=-7.79) However, the expiration date is so far away that waiting might be painful too. If I can finally get over my indecision in this one situation, I will have mastered all trade management skills in the BCI methodology. Can you help me decide?

    Thank you,

    • Alan Ellman May 13, 2023 7:22 am


      Let me request that you reconsider MCU in cases when share price accelerates, leaving the original out-of-the-money strike now deep in-the-money.

      This is the best outcome we could generate because we have an unrealized maximum return with plenty of downside protection of that max return down to the original strike ($109.00).

      Let’s also assume that we are not “married” to the stock and focus in on cash generation, so we are not “portfolio overwriting” long-term holdings.

      You make a valid point that, in these circumstances when closing the short call, we are locking in a loss on the option side. However, we are also locking in a gain on the stock side (if shares are sold), greater than the original “upside potential”. I’m suggesting we focus in on the “total package” … option loss + share gain, not only the option loss.

      The time-value cost-to-close (CTC) can be calculated in our spreadsheets and we ask ourselves, “can we generate at least 1% more than the time-value CTC by contract expiration?” If yes, move on with MCU. If not, continue to monitor the trade.

      I don’t like rolling-up in the same contract cycle in these circumstances, for concerns over profit-taking, leaving us with taking no action if MCU is off the table. I’m hoping you re-evaluate and consider MCU.


  3. Joanna May 13, 2023 4:01 pm

    Thanks for the feedback. I will MCU on Monday. Makes perfect sense.

  4. Barry B May 13, 2023 10:38 pm

    Premium Members,

    This week’s Weekly Stock Screen And Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 05/12/23.

    Also, be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them on The Blue Collar YouTube Channel. For your convenience, the link to the BCI YouTube Channel is:

    Reminder: Premium members are grandfathered into your current rate and will never see a rate increase as long as the membership remains active.


    Barry and The Blue Collar Investor Team

  5. Paul May 14, 2023 10:45 am

    Good morning Alan. Can you please tell me how to record the details of a collar trade in the BCI Trade Management Calculator?


    • Paul May 14, 2023 11:04 am

      Also, what are your thoughts on writing the call ITM as opposed OTM as you suggest in your course? I am specifically looking at CRM for this 16JUN23 expiry trade.
      • CRM trading at 201.81
      • 200 call at $10.30
      • 185 put at $3.15


      • Alan Ellman May 15, 2023 7:24 am


        Typically, collar trades use OTM calls because we have paid for the downside protection by purchasing the protective put. Let’s say we also wanted additional protection on the call side by using an ITM call:

        In this CRM example, we enter the stock price as $200.00. This is how it works:

        The ITM call premium is broken down into 2 components, $1.81 of intrinsic-value (amount the strike is lower than current market value) + $8.49 of time-value ($10.30 – $1.81).

        The $1.81, buys down our cost basis from $201.81 to $200.00.

        That leaves us $8.49 in time-value. From that, we deduct the put premium ($3.15), leaving an option premium entry of $5.34.

        By the way, the reason the CRM premium is so generous is due to the upcoming earnings report, so we should use weekly options to circumvent the ER Report or wait until the report passes altogether.

        Finally, let me reiterate that collars usually involve OTM calls and OTM puts. The above formulas can be employed should ITM calls be used.


    • Alan Ellman May 15, 2023 7:10 am


      Enter in the premium column the net option credit factoring in the short call credit and the long put debit.

      Let’s set up a hypothetical example:

      Buy 100 x BCI at $48.00

      STO 1 $50.00 call at $2.00

      BTO 1 $45.00 put at $1.00

      In the option premium column, enter $1.00 ($2.00 – $1.00).

      If share price drops below $45.00 at expiration and the put is exercised, the final stock price sold is $45.00.


      • Barry B May 15, 2023 9:29 am


        When entering the Collar data as Alan described above, don’t forget to enter the details of the Collar trade in the “Trading Journal” section for reference.


      • Paul May 15, 2023 12:22 pm

        Awesome explanation. Thank you for your multiple responses and your patience.


  6. Jim May 16, 2023 2:26 am


    To test my basic understanding, I have this question:

    For the Weekly options under the CEO regimen, should the initial time value return goal be adjusted to less than 1% (say 1/4 – 1/2%)?

    My reasoning is that such returns, on an annual basis, would equal that of the Monthly’s.

    TIA – Jim

    • Alan Ellman May 16, 2023 7:04 am


      You are 100% correct.

      The advantage, as you stated, is the probability of higher annualized returns.

      The disadvantage, as it relates to this streamlined approach to covered call writing, is the additional time and effort required in order to execute 52 expirations rather than 12.


  7. Alan Ellman May 16, 2023 1:41 pm

    Premium members,

    The new Blue Chip report for the best-performing Dow 30 stocks for the June 2023 contracts has been uploaded to your member site.

    Look on the right side in the “Resources/Downloads” section and scroll down to “B”

    Alan & the BCI team

  8. Alan Ellman May 16, 2023 4:47 pm

    Premium members:

    This week’s 4-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, mid-week market tone as well as the implied volatility of all eligible candidates.

    New members check out our ongoing and never-ending training videos (“Ask Alan” and Blue Hour webinars). We add at least one new video each month. Only premium members have access to the entire library of these training tools.

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

    NOT A PREMIUM MEMBER? Check out this link:

    Alan and the BCI team

  9. William May 18, 2023 1:56 am

    Hello Alan,

    As a premium member I must say that your service is one of the easiest to learn and the most profitable if followed closely. To this I thank you for your efforts.

    I have a question relative to a trade I did just this past month.

    4/27 STO -5 CROX 19may23 125P @ 6.40
    5/17 The position was assigned
    5/17 STO -5 CROX 16jun23 120C @ 4.20

    My question is – in calculating my returns on the covered call side, what cost basis do I use, the assignment price of $125 or the discounted $118.60 (125-6.40).

    Thank you in advance for your time to answer my question, and keep up the great work that you do.

    Best Regards,

    • Alan Ellman May 18, 2023 6:27 am


      Thank you for your generous comments.

      The put trade is finalized entering $125.00 as the final unsold stock price.

      The covered call trade is entered at $125.00, the price paid for the stock. The p[rofit generated for the put trade was calculated in the previous expiration cycle and should not be duplicated in the next (covered call trade).

      This allows us to properly calculate share gain/loss over time.

      Nice work.