Exit strategies for covered call writing and selling cash-secured puts are critical in achieving the highest level of our trading returns. In this article, a real-life example with SPDR S&P Homebuilders ETF (NYSE: XHB) will analyze a cash-secured put trade with 3 exit strategy implementations. Watch how the trade starts out with significant initial returns, then gets even better and finally turns dramatically against us. Exit strategies save the day!
Real-life example with XHB
- 7/11/2024: XHB trading at $105.89
- 7/11/2024: STO the 8/16/2024 $103.00 OTM put at $2.00
- 7/22/2024: XHB price accelerates to $118.66
- 7/22/2024: BTC the 8/16/2024 $103.00 put at $0.56
- 7/22/2024: STO the 8/16/2024 $110.00 put at $1.82 (roll-up #1)
- 7/31/2024: XHB trading at $118.75
- 7/31/2024: BTC the 8/16/2024 $110.00 put at $0.62
- 7/31/2024: STO the 8/16/2024 $115.00 put at $1.72 (roll-up #2)
- 8/2/2024: XHB price decline to $111.50
- 8/2/2024: BTC the 8/16/2024 $115.00 put at $1.45 (3% guideline)
Graphic representation of the XHB cash-secured put trade with exit strategies

XHB put trade: Initial calculations using the BCI Trade Management Calculator (TMC)

- Brown cells: 37-day return of 1.98%, 19.53% annualized
- Purple cell: If exercised, shares are purchased at the breakeven price point of $101.00 (yellow cell), a 4.62% discount
Exit strategies executed in this series of put trades
Rolling-up: Buying back a put option and selling a new option at a higher strike with the same expiration date. This takes advantage of share price acceleration
3% guideline: Closing a cash-secured put trade when share price declines 3% or more from the strike price sold (3% from $115.00 = $111.55). Thís protects us from substantial share price decline
Option credits & debits
- Credits: $2.00 + $1.82 + $1.72 = $5.54
- Debits: $0.56 + $0.62 + $1.45 = $2.63
- Net credit: $2.91 per share, $291.00 per contract
- Cash required to secure the $115.00 put = $113.28 per share
- Final realized return = $2.91/ $113.28 = 2.57%
Discussion
Exit strategy implementation for this cash-secured put trade turned a 37-day 1.98% initial return into a 21-day 2.57% final realized return. The cash freed up from closing the trade can be used to initiate a new cash-secured put trade with a different underlying security and generate another income stream, still in the same contract cycle.
Poor Man’s Covered Call Calculator
The PMCC Calculator is designed to determine initial trade structure and status as well as various position management price point considerations the exit strategy price buyback points to buy back the short calls based on the 20%/10% guidelines detailed in the BCI books and online video programs.
Cells will be provided to enter the option month and current date used to assist with the calculations. There are 5 tabs incorporated into this calculator:
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:
Upcoming events
1. BCI-only Webinar
1/16/2025
8 PM ET – 9:30 PM ET
The Collar Strategy: Covered Call Writing with Protective Puts
Protecting covered call trades from catastrophic share loss
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 ceiling on the trade and the protective put guarantees a floor on the trade.
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
- Educational products & discount coupon
- Q&A
Click here to register for free.
2. Long Island Stock Investor Group Part I
Zoom
February 13, 2025
7:30 – 9:00 ET
Private investment club
Covered Call Writing Dividend Stocks
3. Las Vegas Money Show
February 17 – 18, 2025
- Ultra Low-Risk Approaches to Covered Call Writing and Selling Cash-Secured Puts
- Covered Call Writing Technology Stocks
4. Long Island Stock Investor Group Part II
March 13, 2025
7:30 – 9:00 ET
Private investment club
Cash-Secured Puts: 2 Outcomes
5. MoneyShow Masters Symposium Dallas 2025
Saturday April 5, 2025
Hilton DFW Lakes
Saturday April 5, 2025
Hilton DFW Lakes
2 events:
45-minute workshop
- Option basics
- The 3-required skills
- Practical applications
- Traditional put-selling
- PCP (Put-Call-Put or wheel) Strategy (adds covered call writing)
- Buy a stock at a discount instead of setting a limit order
All Stars of Options panel discussion
Details to follow.
6. MoneyShow Masters Symposium Miami 2025
Thursday May 15, 2025
Details to follow.

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 01/10/25.
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:
https://www.youtube.com/user/BlueCollarInvestor
Reminder: Premium Member’s pricing is locked into your current rate and you will never see a rate increase as long as the membership remains active.
Barry and The Blue Collar Investor Team
Hi Alan,
As time has moved on, and I am becoming better at this options game, I
have a question.
I have settled on selling CSP on SPY, avoiding earnings
reports yet having something tangible in the end if I get assigned
(unlike XSP).
So the question is following the BCI methodology do you
use a 20% or a 10% BTC for the weeklies?
Would you potentially start with the 20% and half way through the week switch to a 10%?
How do you handle the BTC for the weekly?
—
Thanks,
Dave
Dave,
Because of the “Theta” effect (time-value erosion), we are not willing to pay 20% in the last 2 weeks of a monthly contract or in a weekly contract.
We use 10% for weekly contracts once the trades are entered.
Alan
Premium members,
The new Blue Chip Report for the best-performing Dow stocks for the February 2025 contracts has been uploaded to your member site.
Look on the right side of the member page in the “resources/downloads” section and scroll down to “B”.
Alan & the BCI team
Premium members:
This week’s 4-page report of top-performing ETFs, along with our sample trade of the week, 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.
We have also included a sample trade taken from one of our BCI watchlists.
Premium member video link:
https://youtu.be/EXMO-KwZuJs
For your convenience, here is the link to login to the premium site:
https://www.thebluecollarinvestor.com/member/login.php
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https://www.thebluecollarinvestor.com/membership.shtml
Alan and the BCI team