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Risk-Reward Profile When Rolling-Up Our Cash-Secured Put Trades

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One of our available cash-secured put trade exit strategies is rolling-up to generate an additional income stream (or multiple income streams). The disadvantage of this position management approach is that we are bringing the strike closer to current market value, enhancing the possibility of exercise. If avoiding exercise of our short puts is inherent in our strategy approach, we must understand the risk involved and compare that to the potential reward. In this article, a real-life 4-day trade with NVIDIA Corp. (Nasdaq: NVDA) will be highlighted.

NVDA trades

  • 6/20/2023: NVDA trading at $429.44
  • /20/2023: Sell-to-open (STO) 1 x 6/23/2023 $410.00 put at $1.54
  • 6/20/2023: Buy-to-close 1 x 6/23/2023 $410.00 put at $0.82
  • 6/20/2023: STO 1 x 6/23/2023 $41500 put (roll-up) at $137.00
  • 6/23/2023: The 6/23/2023 $415.00 put expires out-of-the-money and worthless

Broker screenshot of NVDA trades

Note that the $415.00 rolled-up strike showed a Delta of 13 when viewing the option-chain. This means that there is an approximate 87% probability that the strike will expire out-of-the-money and worthless at expiration. This would be a desirable result for most put-sellers who do not want to take possession of the underlying security or initiate exit strategies to avoid exercise.

Pre- and post-adjustment calculations with the BCI TMC spreadsheet

  • Brown cells show a pre-adjustment return of 0.38%, 34.40% annualized
  • Purple cell shows a post-adjusted 4-day return of 0.51%, 46.54% annualized. This represents an improvement of 34.2%, due to rolling-up
  • The Trade Journal entry archives the steps taken to achieve the final results


When adjusting our option trades, we must understand the pros & cons or the risk-reward components of our trade adjustments. In this NVDA example, there was an approximate 13% risk of the option moving in-the-money and subject to exercise, while providing the opportunity of enhancing returns by 34.2%. Once these potential outcomes are understood, we can make an informed decision as whether we want to move forward with this exit strategy.

Covered Call Writing Alternative Strategies

Portfolio Overwriting– using stocks in buy-and-hold portfolios.
The Collar Strategy– using protective puts.
The Poor Man’s Covered Call– using LEAPS options.
Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies.

Click here for more information and purchase link.

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 share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Hey Alan,

I have great appreciation for all you do for sharing your wisdom with us!! I have enjoyed much success to trading options with your methods I read in your calls and puts books as well as being a Premium Member.

Thanks again,


Upcoming events

1. Mad Hedge Investor Summit

December 5 at 11 AM ET – 12 PM ET

Tuesday December 5, 2023

11 AM ET – 12 PM ET

Using Both Covered Call Writing and Put-Selling to Generate Monthly Cash Flow

Investing with Stock Options

Hosted by Dr. Alan Ellman, President of The Blue Collar Investor Corp.

Barry Bergman, BCI Managing Director

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 a 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 consistent, returns which will enable us to beat the market on a consistent basis while focusing on capital preservation.

Registration link to follow.

2. BCI-Only Webinar: Portfolio Overwriting

Portfolio Overwriting: Covered Call Writing Our Buy-And-Hold Stocks

Increasing profits and avoiding tax issues

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
  • BCI Trade Management Calculator
  • Summary

Details & registration link to follow.

3. Long Island Stock Traders Meetup Group (private investment club- Part I)

Thursday February 15, 2024

7:30 PM ET – 9:00 PM ET.

Club members only.

4. Las Vegas Money Show & Stock Traders Live In-Person Event

February 21 – 23, 2024

Paris Hotel

Details to follow.

5. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

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

14 Responses to “Risk-Reward Profile When Rolling-Up Our Cash-Secured Put Trades”

  1. Neville November 18, 2023 3:12 am #


    Read your e book on selling naked puts.

    The emphasis is on selling OTM puts.

    In a strong market and stock why would you not sell ITM puts with the same premiums?

    In my limited knowledge of the option graphs I noticed the breakeven and max. profit are both higher but loss could be higher !!

    Have ordered your text book!


    • Alan Ellman November 18, 2023 7:15 am #


      Our decisions regarding the use of OTM or ITM CSPs, is heavily influenced as to whether we are inclined to take possession of the shares. Most put sellers do not want to own the shares.

      An exception is the PCP or “wheel” strategy, where we take possession of the shares upon exercise of an ITM CSP and then write a covered call.

      We may also sell an ITM CSP, if we want to own the shares as soon as possible at a discounted price. In this scenario, an ITM CSP is a reasonable approach.

      If we sold an ITM CSP and we wanted to avoid exercise at expiration, we would have to buy back the short put and that would reduce our premium returns.

      In a strong or bull market, I favor OTM covered calls. ITM CSPs can work as well, as long as we are willing to take possession of the shares and now, we are back to writing covered calls.

      Bottom line: We provide guidelines (not rules) to our members. In this case, in strong bull markets, I favor OTM covered calls over ITM CSPs, although both approaches can result in positive outcomes.


  2. Barry B November 18, 2023 9:56 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 11/17/23.

    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 Member’s pricing is locked 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

  3. Mike November 19, 2023 9:23 am #


    I see some Youtube videos about 0 DTE options. Just wanted your take.


    • Alan Ellman November 19, 2023 12:05 pm #


      In my humble opinion, 0 DTE trading is not appropriate for a vast majority of retail investors. There has been a huge interest in this strategy for those looking to generate high returns in short time frames. It is day-trading.

      Trades are entered and exited on the final day of contract expiration. Most use sophisticated price charts to analyze market direction and then place their bets. There is little or no time for mitigation, when trades turn against us.

      I’ll pass on 0 DTE trading and I would encourage most retail investors to do the same.

      That said, this type of trading may be appropriate for sophisticated, experienced traders with high personal risk tolerance looking for substantial short-term profits.


  4. Malcolm November 19, 2023 11:18 am #

    Hi Alan

    Re avoiding Exercise and your suggestion to go deep OTM.

    My experience with trying to do this is that using strike prices really OTM means no volume, no interest, very low payback.

    One way to make this better is to lengthen the time, but then that leaves you open to sudden movements in the stock price. I don’t think there is any easy answer !!



    • Alan Ellman November 20, 2023 7:55 am #


      If we are using liquid securities (robust trading volume), we will find a significant number of portfolio overwriting opportunities, assuming our annualized initial time-value return goal range is 4% – 8% over current earnings.

      As one example, I’ve selected Invesco QQQ Trust (Nasdaq: QQQ), an exchange traded fund consisted of 100 of the largest non-financial companies listed on the Nasdaq exchange.

      Using the BCI Expected Price Movement Calculator (see screenshot below) and the current ATM implied volatility (IV-16), we get an approximate high end of the range of $402.12. This represents an approximate 84% accuracy … a really good risk/reward ratio.

      The $402.00 strike is currently (pre-market) showing a bid price of $1.56 for the 12/15/2023 expiration.

      Our BCI Trade management Calculator (TMC) shows an annualized initial return of 5.68% which certainly meets our pre-stated goal.

      There is a myriad of other similar examples.



  5. Marcus November 19, 2023 2:48 pm #


    What’s your take on what will happen to NVDA this Tuesday? Will it sell-off on its earnings and forecast, spike like it did during its last earnings’ call, or sell-off first only to be bought up furiously and spike?



    • Alan Ellman November 20, 2023 1:59 pm #


      Earnings reports are unpredictable. Only corporate insiders know, for sure, what the results will be.

      NVDA is a solid company, with historically strong earnings reports and, obviously, a Wall Street favorite. I, like many of our members, have done quite well with NVDA over the years.

      Now, when NVDA reports, it may miss consensus and share price will decline. Or it may beat consensus but miss the “whisper #” (unofficial expectation of market professionals), and, BOOM, it will fall in price. Perhaps, it will beat consensus and the whisper #, but issue concerning guidance moving forward. Once again … we’ll you get the idea.

      Of course, the complete opposite may occur, or price may just stay in the same range as it was prior to the report.

      As I’m typing, I’m realizing how unhelpful this response must seem, but the bottom line is that retail investors and professionals as well, simply do not know.

      If NVDA was already in my portfolio (and it is), I will not cap the upside with a covered call, but rather wait for the report to pass and write the call when post-report volatility subsides.


  6. Marcus November 20, 2023 6:08 pm #

    Thanks, Alan.

    Say, when do you EVER add to a position that has skyrocketed from your initial purchase? For example, I bought 100 shares of NVDA at 145.

    Given its future possibilities, it would be nice to add to my position, but if I did, my cost-basis would suffer. Would you buy more shares…EVER? If so, when and how many so as to maintain a healthy profit moving forward?

    Thanks again, Alan!


    • Alan Ellman November 21, 2023 7:31 am #


      There are several factors that go into a decision to increase the # of shares that exist in a portfolio. Here are some with a few ideas:

      1. What is the purpose of the portfolio (option-selling, long-term buy-and-hold?). If the former, it would be based on current screening criteria; if the latter, we may buy on dips.

      2. What is the makeup of our portfolio? We want to be properly diversified. For example, 80% chip stocks is not a sensible approach.

      3. What is our portfolio net worth? We also want to establish a portfolio that has appropriate cash allocation per position.

      4. In my book, “Stock Investing for Students”, I discuss dollar-cost-averaging into broad market, low expense ratio index funds. This is another sound financial approach to adding shares of a security that we want to retain for the long-term. One of my portfolios is dedicated to this strategy.

      5. If we want to purchase a security, but feel the price is too high at the time, we can sell OTM cash-secured puts to buy at a discount or get paid not to buy the stock. Here’s one example:

      Right now, it looks like NVDA can never go down in price. It can. It will. However, it is a great company that has generated significant income for many investors over the years. Still, we must adhere to sound financial principles and avoid emotion when making our trade decisions.


      • Alan Ellman November 21, 2023 7:58 am #

        According to

        NVDA will report tonight at 4:20 PM ET

        Consensus: $3.18

        Whisper #: $3.47


      • Marcus November 21, 2023 11:36 am #


        Thanks for this sage advice, Alan.

        Have a great Thanksgiving!

        Your biggest fan,


  7. Alan Ellman November 22, 2023 4:55 pm #

    Premium members:

    This week’s 4-page report of top-performing ETFs has been uploaded to your premium site. The Select Sector SPDR section is now crafted to align with our streamlined (CEO) approach to covered call writing. The report also lists Top-performing ETFs with Weekly options, mid-week market tone as well as the implied volatility of all eligible candidates.

    Premium member video link:

    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

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