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covered call writing exit strategies

Should I Unwind My Covered Call Trade 1 Week Prior to Contract Expiration?: A Real-Life Example with Alibaba Group

Covered call writing exit strategies are critical to our overall success. There are times, however, when the best action is no action at all. On July 25th 2019, Rob shared with me a successful trade he executed and was considering closing 1 week prior to the 8/2/2019 expiration. For an answer, we need to turn […]

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Rolling Decisions on Expiration Friday: A Real-Life Example with Veeva Systems

Position management is the 3rd required skill for our covered call writing and put-selling success. On 7/19/2019, Larry shared with me a series of trades he executed with Veeva Systems Inc. (NYSE: VEEV). He astutely “hit a double” and was now looking to roll the option to the following month.  Larry’s trades and inquiry (in […]

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covered call writing exit strategies

Evaluating Stock Purchase Price and Breakeven When Rolling Out-And-Up

When we write a covered call, our breakeven is stock purchase price – entire call premium. If we buy a stock for $48.00 and sell an option for $2.50, the breakeven is $45.50. In June 2019, John shared with me a series of trades he executed with Planet Fitness, Inc. (NYSE: PLNT) where he wrote […]

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covered call writing exit strategies

Is This Trade a Winner or a Loser?: A Real-Life Example with XLE

Covered call writers must understand and evaluate the success (or lack thereof) of our trades. Simply stated, are they winners or losers? In June 2019, Van shared with me trades he executed with the exchange-traded fund (ETF), Energy Select Sector SPDR Fund (NYSE: XLE). He was trying to categorize his trade as a winner or […]

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Analyzing 4-Day and 2-Month Trades with XBI

Mario was generous in sharing his covered call writing trades with SPDR S&P Biotech ETF (NYSE: XBI). The trades were executed over a 2-month time-frame, the last of which was a 4-day Weekly option.   Mario’s trades with XBI 4/17/2019: Buy XBI at $84.95 4/17/2019 – 6/2019: Sell calls and “hit doubles” to lower cost-basis […]

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covered call writing trades

Combining In-The-Money Strikes and Stock Dividends to Provide Protection in Bear Markets + Holiday Discounts

When establishing our covered call writing trades, we must factor in current market conditions to either add protection in bear and volatile environments or to take advantage of normal to bull market scenarios. On May 17, 2019, Mauricio sent me a diagrammatic strategy proposal that would lower the breakeven using an in-the-money (ITM) strike as […]

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covered call writing calculations

Selling Deep In-The-Money Calls to Exit Stock Positions

Covered call writing is used predominantly to generate cash flow in a low-risk manner. But it can also be used to exit stock positions while mitigating losses in those trades. As an example, I will use a series of trades shared with me by Ashvin on May 16th, 2019. The underlying security was iShares MSCI […]

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Delta and the moneyness of strikes

Delta as the Sole Criteria for Covered Call Writing Strike Selection

Strike selection is the second required skill when writing covered call options or selling cash-secured puts. Over the years I have been asked to suggest a specific Delta for strike selection implying that this statistic would be the sole criterion to determine strike determination. This article will make a case why Delta, although important, should […]

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Rolling Up in the Same Contract Month: A Real-Life Example with KMX

Position management or exit strategies for covered call writing and selling puts is the third required skill to achieve the highest possible return levels (stock and option selection are the first two). First, we must determine if an exit strategy opportunity actually exists and then, if so, which one to execute. On May 3rd 2019, […]

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Blackjack and Covered Call Writing: Throwing the Odds in Our Favor with PayPal Holdings Inc. (NASDAQ: PYPL)

Covered call writers and all investors using stock options strategies have one thing in common: we all want to achieve the highest possible returns within the framework of our own personal risk tolerance. The focus of this site and The Blue Collar Investor is to provide the education and to share ideas that will help […]

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