Generating a consistent cash flow from stock dividends is an appealing benefit from owning shares for many investors. Stock ownership, in these scenarios, can create two income streams, one from price appreciation and the other from quarterly dividends. However, not all securities have associated dividends and some investors will bypass these stocks even if they […]
Why Covered Call Writing Outperforms the Overall Market
Why should we spend the time to educate ourselves on how to implement and manage covered call writing trades? The answer is simple: Once the 3 required skills (stock selection, option selection and position management) are mastered, we will put ourselves in a position to beat the market on a consistent basis. This article will […]
Pros and Cons of Covered Call Writing: Calculation Perspective
Every investment strategy, including covered call writing and selling cash-secured puts, has advantages and disadvantages. When we decide to implement a plan, it is with the understanding that we accept and embrace these pros and cons. It is not productive to look back and say we could have made more money using a different approach. […]
Naked Options versus Covered Options: Where Should We Take a Stand?
Covered call writing and selling cash-secured puts are more conservative strategies than trading naked options (selling calls and puts without having the resources to execute the potential trade obligations, if exercised). A naked call occurs when a speculator writes (sells) a call option on a security without ownership of that security. It is one of […]
Is Covered Call Writing a Zero Sum Game? Let’s Do the Math
Many assume that covered call writing is a zero sum game because we have traders executing equal but opposite trades using the same underlying security. As a covered call writer, we may sell 5 contracts of AAPL which means there is a buyer out there who just bought our contracts. If we win, they lose and […]
Comparing Covered Call Writing and Selling Cash-Secured Puts
An accepted myth is that covered call writing and selling cash-secured puts are precisely the same strategy. The reason this statement is generally accepted by many investors is that they have the same risk-reward profiles or profit and loss graphs: In this article, other similarities will be discussed as well as some distinct differences […]
Using Multiple Premium Reports to Fund our Covered Call Writing and Put-Selling Portfolios
Stock and ETF (exchange-traded fund) selection is one of the three required skills needed to achieve the highest level of success when selling options. Covered call writers and put-sellers have varying degrees of personal risk tolerance and trading styles. As a result, over the years and based on member feedback, the BCI team has added […]
Exercise Of Options From The Call Buyer’s Perspective
Since we are selling call and put options we know there are traders or market makers who are buying them. In this article we will explore why only about 10% of all call options are actually exercised by the option holders even when the holders want to own the underlying shares. Why are call […]
Naked Call Sellers VS. Covered Call Writers: Different Perspectives
Covered call writing and selling cash-secured puts are considered conservative, low-risk option strategies. Naked option trading is acknowledged to be a more speculative approach to trading options. In the case of covered call writing especially, this is confirmed by the fact that brokerages require a higher level of trading approval for naked option trading than […]
Gamma: The Delta of Delta Impacting Exit Strategy Opportunities
Option Greeks are mathematical means of measuring the risk of stock options. One of the least discussed of these factors is Gamma. In this article, we will explore the significance of this Greek and relate it to covered call writing. Gamma defined and explained- Second order price sensitivity Gamma is an estimate of how […]
