When we select a stock for our covered call writing or cash-secured put trades, one of the main resources we analyze in the BCI Stock Reports, crafted starting after market close on Fridays. The other main reports we provide to our members are the Exchange-Traded Fund (ETF) Reports and the Blue Chip (Dow 30) Reports. This article will provide an overview of the information found in our stock reports.
Real-life example with Vertex, Inc. (Nasdaq: VERX) from the report dated 10/6/2023- See video links at bottom of article
This image represents a small area within our 18-page report. Let’s review each column, left-to-right (Columns will be identified by title as they are difficult to read in1 single screenshot):
- Symbol: Ticker symbol of the stock. Stocks in bold have the most bullish technical charts (both SMCI and VERX in this screenshot). See the chart below for an example of a bullish chart pattern
- Company name:
- Weekly rank or other resource: A number represents the ranking within the most recent IBD 50 ranking. “Other” represents a stock taken from the BCI database of stocks we have identified as potential option-selling candidates over the years. “PRW” represents stocks that have passed BCI screens in recent weeks. “BC20” are stocks from the IBD Big Cap 20 list. “SL” are stocks taken from the IBD Sector Leaders list.
- Price: Price of the stock at the time the report was crafted
- Industry Segment: Identifies the industry of that stock
- Segment Rank: A = Top 20%; B = next 20% and so on
- Pass Fundamental & Technical Screens: Have the highest ratings in all 6 categories of the IBD Smart
- Mean Analyst Rating (MAR): Summary of all institutional analysts following that stock. 1 – 5, with 1 being the best and 5 the lowest. We only accept stock ranked 3 or lower
- On balance Volume (OBV): Adds trading volume on “up” days and subtracts trading volume on “down” days to identify an institutional trend and interest in a stock. Arrows indicate a bullish, neutral or bearish trend
- The next 3 columns relate to technical analysis. See the chart below
- Beta: Relates historical volatility of the stock to the S&P 500 over the past 1 year
- % Dividend Yield: Annual yield if a dividend is generated
- ATM IV%: Implied volatility of the stock based on current option pricing in the marketplace. Higher IV means higher premiums but greater risk
- NTM OI: Relates to option liquidity. Is open interest > 100 contracts?
- Next ER: Date of upcoming earnings report based on studying multiple resources. This date can be updated by a company so must be rechecked by investors, if the date is close to a contract expiration date
- Wkly Avail: Staes whether the stock is associated with weekly options, in addition to longer-dated expirations
- # Wks On Run List: Stocks on our watchlist for multiple weeks are showing strength and staying power
- Comments: Special notes, if applicable and also ex-dividend dates, when applicable
VERX technical chart on 10/6/2023
- #1: The 20-day exponential moving average (EMA) is above the 100-day EMA. The OHLC bars ar at or above the 20-day EMA. This identifies a bullish trend
- #2: The MACD histogram (blue bars) are above the zero-line. This suggests positive trend and momentum
- #3: The stochastic oscillator (black line) is moving upward from the below the 20% line, indicating positive momentum
- #4: Volume bars remain strong, confirming the bullish indicators and showing no sign of negative volume divergence, which would mean a bearish signal
- Since all technical parameters used in our BCI methodology are bullish, VERX is posted in bold in the October 6 report
Discussion
The BCI Premium Member Stocks Reports consist of a significant amount of information analyzed from fundamental, technical and common-sense perspectives, which allows our members to make informed decisions regarding the underlying securities we use for our option-selling portfolios.
Detailed videos regarding BCI Premium Membership & Reports
BCI Trade Management System: Calculator, User Guide & Exit Strategy Book Package
(Video will not play from this screenshot. Click the link below to watch the video)
This is the only spreadsheet in existence that allows the user to enter covered call writing and cash-secured put trades, receive initial trade and portfolio calculations, execute > 20 exit strategy trade adjustments and then calculate final post-adjusted trade and portfolio results. This is an absolute must for all covered call writers and sellers of cash-secured puts.
Click here for more information and to order this product.
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:
Alan!
You started me down the road to becoming a successful options investor so many years ago. I still have MUCH to learn and would highly value continued connections with you and BCI! Thank you again and again!!!
Randy
Upcoming events
1. 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.
2. Las Vegas Money Show & Stock Traders Live In-Person Event
February 22 & 23, 2024
Paris Hotel
Thursday, February 22, 2024, at 4:55 pm – 5:25 pm PST
The PCP (put-call-put or “wheel”) Strategy
Friday, February 23, 2024, at 12:00 pm – 12:45 pm PST
Covered Call Writing: A Streamlined Approach
3. Mad Hedge Investor Summit
Tuesday March 12, 2024
11 AM ET – 12 PM ET
Free registration link to follow.
Covered Call Writing Dividend Stocks to Create a 3-Income Strategy
Covered call writing is a low-risk option-selling strategy that generates weekly or monthly cash-flow. By mastering the skill of strike price selection and adding dividend distributions, a potential 3-income strategy can be crafted with a goal of beating the market on a consistent basis.
Topics covered in this webinar include:
- Strategy analysis
- Option basics
- What is covered call writing?
- Dividend distribution
- Stock selection
- Option selection
- Trade management
Real-life examples will be highlighted with Dow 30 stocks using option-chains and calculation spreadsheets.
Attendees will have the opportunity to participate in written chat box Q&A during the entire webinar.
A deeply discounted comprehensive package of educational products and tools will be offered in the final minutes of the webinar.
4. 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
5. BCI-Only Webinar
Thursday April 11, 2024
8 PM ET – 9:30 PM ET
Topic, description and free registration information to follow.
All questions related to covered call writing and cash-secured puts will be answered in real time after the webinar presentation.
6. Stock Traders Expo- live event in Orlando Florida
October 17 -20
Details to follow.
Alan,
What do you think about only using stocks that give dividends for covered call writing? This way, we get another income stream. premium + share appreciation (if we use out of the money strikes) + dividends. Make sense?
Thank you,
Robert
Robert,
We must stay focused on what makes for elite securities for option selling (cover call writing, when dividends are factored in).
In our BCI methodology, this involves fundamental & technical analysis + common-sense principles (avoid earnings reports, minimum trading volume etc.). The stocks in our final watch lists which also generate dividends, we consider those distributions “icing on the cake”, but not our primary focus.
Additional considerations:
1. To be eligible to capture a dividend, we must own the shares on the ex-dividend date. This is also the date that is most likely to result in early exercise of our options.
2. On this ex-date, share value will decline by the dividend amount. Now, there are other factors that will influence share price that day, but 1 of those factors is share decline by the dividend amount.
Bottom line: Dividends are nice, but not our primary focus.
Alan
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 02/09/24.
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:
https://www.youtube.com/user/BlueCollarInvestor
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.
Best,
Barry and The Blue Collar Investor Team
Hi Alan:
I hope you are doing well.
Can you please assist me with these two questions:
Please explain the calculation for the Downside Protection in the attached slide; and
Please provide a BCI alternative to the DCCC calculator that has your blessing.
Thank you so much for all you do.
Steve
CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.
Steve,
In our BCI methodology, “downside protection” is defined as the % amount share price can decline while still retaining 100% of the initial time-value profit generated from the sale of the call option. It applies only to in-the-money (ITM) strikes. This is different from “breakeven”.
The formula is [(Intrinsic value component of the ITM premium/ Share price of the underlying security at the time of the trade)]
In the screenshot, it is [$3.00/$48.00] = 6.25%.
The screenshot is of our Trade Management Calculator (TMC). This is the best (in our humble opinions) and most recent of our calculator tools and a must for all covered call writers and sellers of cash-secured puts.
Alan
Premium members,
The new Blue Chip Report for the best-performing Dow 30 stocks for the March 2024 contracts has been uploaded to your member site.
Scroll down to “B”” on the right side (“resources/downloads” section).
Alan & the BCI team
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:
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
NOT A PREMIUM MEMBER? Check out this link:
https://www.thebluecollarinvestor.com/membership.shtml
Alan and the BCI team
Hi Alan,
For the premium stock watch list, only stocks that pass a LOT of criteria are on the list. Well and good.
But what about the ETF’s. What tools are there that are confirming tools to use for ETF’s. They seem to be listed on the ETF list strictly depending on if they are better than the S&P 500.
Is that correct, or have I missed how they can be confirmed by other indicators or the like, sir.
Thank you for all the help you give us,
John
John,
Since ETFs are “baskets of stocks”, we cannot apply the same screens we use for individual stocks.
Here are the main criteria we use for eligible ETFs for our weekly premium member reports:
1. Average trading volume of > 250,00 shares per day.
2. Option liquidity of > 100 contracts of open interest and/or a bid-ask spread of $0.30 or less. My team studies option chains for each security to confirm.
3. Non-leveraged.
4. Relative price strength (RS) of >60.
5. Out-performed the S&P 500 in both 1- and 3-month timeframes.
6. Additional data (recent price, implied volatility, weeklys available? and 1-week price performance) is also provided to assist our members in determining final decisions.
7. ETFs in the report are sorted by 1-month price performance.
Alan