When we add a protective put to our covered call trades the strategy is known as a collar. To reduce the monthly cost of the long put, some investors will consider using longer-term put expirations This article will explore the pros and cons of this approach using Ciena Corp. (NYSE: CIEN). Collar trade information […]
Protecting Our Covered Call Trades: Protective Puts Versus In-The-Money Strikes
Covered call writing is a low-risk, cash-generating strategy. We can lower the risk to an even greater extent by purchasing protective puts and by writing in-the-money (ITM) call options. Now, buying protective puts (called the collar strategy when used in conjunction with covered call writing) costs money and will lower our returns. Using ITM calls […]
What Do Covered Call Writing and Steroids Have in Common?
Most investors view covered call writing as a singular strategy where we buy a stock and then sell an option leveraging that security. In reality, educated option-sellers realize that one of the most remarkable advantages of using this strategy is that it can be crafted to achieve multiple goals and meet the trading style and […]
Protective Puts and the Collar Strategy: Selecting the Best Strike Prices/ Last Chance for Holiday Orders
Covered call writing, when combined with protective puts, is known as the collar strategy. The maximum gain is established by the short call strike while the maximum loss is defined by the long put strike. For example, if a stock is purchased for $48.00 per share and the $50.00 call is sold while the $45.00 […]
The Collar Strategy from a Delta Perspective
When covered call writing is combined with protective puts the strategy is known as the collar strategy. The short call places a ceiling on gains and the long put represents a floor protecting losses. The two option positions should result in a net credit. Typically, out-of-the-money calls and puts are selected. Covered call writing and […]
Using Delta to Determine the Amount of Risk in Our Option-Selling Positions
Covered call writing and selling cash-secured puts are low-risk option-selling strategies used to generate monthly cash flow. Low-risk does not mean no risk so how can we measure the degree of risk we are undertaking? Let’s first all agree that any strategy that aspires to generate higher than a risk-free return (Treasuries, for example) will incur […]
Protective Puts: Selecting the Best Strike Price
Covered call writing involves buying a stock and selling a call option. When a put is also purchased to avoid significant downside loss, it is referred to as a protective put and the strategy as a whole is referred to as a collar. When a put option is purchased on the same day that a stock is purchased, […]
What Do Bernie Madoff and Covered Call Writing Have In Common?
Covered call writing is my favorite stock investment strategy and Bernie Madoff is one of the world’s most infamous sociopaths. How can they exist in the same article title? This week, ABC-TV is showing a mini-series documenting the rise and fall of Bernie Madoff and his $65 billion Ponzi scheme. Madoff never actually ever invested the […]
Using a Zero-Dollar Collar to Protect Low Cost Basis Stocks
Using covered calls and puts in a conservative manner can benefit us in so many ways. In this article I will present a method to protect stocks in our portfolio that have increased in value substantially since they were purchased. We will utilize both covered call writing and protective puts which is known as the […]
Covered Call Writing With Protective Puts: A Proposed Strategy
When protective puts are integrated into our covered call writing strategy it is known as the collar strategy. The covered call aspect of the trade generates cash flow and the protective put leg serves as an insurance policy against catastrophic share depreciation. Recently, one of our members, Gary, shared with me a related strategy he had […]
Podcast
- 50. Exit strategies Must Be Timed Properly
- 49. Analyzing a Multi Leg Covered Call Rolling Down Series of Trades
- 48. Rolling Deep OTM Cash Secured Puts
- 47. Rolling Up in the Same Contract Month
- 46. Should Delta Be the Sole Criteria for Covered Call Writing Strike Selection
- 45. Implied Volatility and Expected price Movement During the Life of Option Contracts
- 44. Can We Use ITM Strikes to Create a No Risk Covered Call Strategy?
- 43. Converting a Covered Call Trade to a Collar Trade
- 42. Why Was My OTM Put Exercised?
- 41. Collar Trades When Call Strikes Move Deep In The Money
Recent Comments