When our covered call writing strikes are expiring in-the-money (ITM), and we want to retain the underlying shares for the next contract period, we can roll the option forward. This involves buying back the current short call(s) and selling the next month (or week etc.) strike. If we roll-out, we always roll-out to an ITM strike because if a strike is ITM at the time of the roll, it will still be ITM for the next contract, as well, at the time of the exit strategy execution. However, if we roll out-and-up, the later-date strike can be ITM, ATM or OTM. This article will highlight such scenarios using QQQ.

 

Real-life trade with QQQ as of 11/20/2021

  • 10/19/2021: Buy 100 x QQQ at $374.92
  • 10/19/2021: Sell-to-open (STO) the 11/19/2021 $380.00 call at $3.74
  • 11/18/2021: QQQ trading at $397.15
  • 11/18/2021: Cost-to-close (CTC) the 11/19/2021 $380.00 call is $17.31
  • 11/18/2021: Evaluating rolling-out and rolling-out-and-up

 

Option-chain information on 11/18/2021

  • CTC the near-month $380.00 call: $17.31
  • STO the 12/17/2021 $380.00 call: $20.82 (rolling-out)
  • STO the 12/17/2021 $395.00 call: $9.83 (rolling out-and-up to an ITM strike)
  • STO the 12/17/2021 $400.00 call: $7.10 (rolling out-and-up to an OTM strike)

 

Entering the information into the “What Now” tab of the Trade Management Calculator

 

QQQ Rolling Calculations Information Entered

Information is entered for rolling out to the same $380.00 strike and out-and-up to the ITM $395.00 strike.

 

Rolling final calculations for the $380.00 and $395.00 strikes

 

QQQ: Final Calculations for the $380.00 and $395.00 Strikes

 

Rolling-out generated a 1-month initial time-value return of 0.92% with a 4.30% downside protection of that time-value profit; while rolling out-and-up to the ITM $395.00 strike generated an initial 1-month time-value return of 1.98% with 0.50% downside protection of that time-value profit.

 

Rolling final calculations for the $400.00 OTM strike

QQQ: Rolling Out-And-Up to an OTM Strike

 

Rolling out-and-up to the $400.00 OTM strike generated a 1-month initial time-value profit of 1.83% with the possibility of a maximum 1-month return of 2.58% if share price rises to the OTM $400.00 strike by expiration.

 

Discussion

Rolling our ITM covered call strikes presents several opportunities. We can roll-out to the same strike or roll-out-and-up to ITM, ATM or OTM strikes. We can use the “What Now” tab of the BCI Calculators to facilitate these calculations and, therefore, our trading decisions. In our new Trade Management Calculator, this tab is located as a worksheet on the bottom of the spreadsheet.

 

The BCI Trade Management Calculator Package is now available/ Discount expires Sunday 5/15/2022 midnight

After a year and a half of development and beta-testing our 1-of-a-kind Trade Management Calculator is here. We have packaged it with our new book, The Blue Collar Investor’s Guide to Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts.

We are also offering the opportunity to combine this package with our BCI Package and offering early-order discount coupons for both:

Information on the TMC Package:

https://thebluecollarinvestor.com/minimembership/bci-trade-management-system/

 

Information on the BCI Package:

https://thebluecollarinvestor.com/minimembership/bci-investor-program/

 

Early-order discount coupons (expires 5/15/2022):

TMC Package: tmc50 ($50.00 off)

Combined TMC/BCI: superdeal100 ($100.00 off)

We hope you enjoy, and most importantly, benefit from our new products.

 

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,

I came across your videos on YouTube a few days ago and, through your teachings, started my covered call education and journey. Let me say that this is, by far, the best content I’ve come across in my quest to understand this strategy. Thank you for your work and content.

Tanya

 

Upcoming events

1.Money Show Canada Virtual Event

Analyzing a 1-Month Covered Call Writing Portfolio from Start-To-Finish

A real-life example with a $100k ETF Select Sector SPDR portfolio 

May 24, 2022

10:40 AM ET – 11:10 AM ET

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

Register for free here

 

2. Mad Hedge Investor Summit

June 15th, 2022

12 PM ET – 1 PM ET

Topic & registration link to follow

 

3.American Association of Individual Investors: Greensboro North Carolina Chapter

Saturday June 18, 2022

10 AM – 12 PM ET

The PCP (put-call-put or wheel) Strategy

Using both covered call writing and selling cash-secured in a multi-tiered low-risk option-selling strategy where we either generate cash-flow or buy a stock at a discount.

Zoom webinar for Chapter members

 

4. Money Show Orlando live event

October 30th – November 1st, 2022

OMNI ORLANDO RESORT AT CHAMPIONSGATE

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

Details to follow.

 

Alan speaking at a Money Show event

***********************************************************************************************************************

Market tone data is now located on page 1 of our premium member stock reports and page 1 of our mid-week ETF reports.

****************************************************************************************************************