When selling covered call and put options we must first establish our initial time value return goals. We also should factor in upside potential when writing out-of-the-money call options and downside protection of those time value returns in bear and volatile markets. Do we accomplish these parameters based on our total portfolio returns or on […]
Buying Low and Selling High Also Applies to Option-Selling
Covered call writers hold two positions. We are long (own) the stock and short (sold) the call option. It is intuitive to investors that it is to our advantage if the stock price accelerates or at least does not decline in value. There are five possible outcomes in the stock portion of our trade: Stock […]
Rolling Out-And-Up And Then Stock Price Declines
Rolling our covered call trades involves multiple months of trading statistics. The calculations may be deceiving initially but on deeper analysis, rolling our options can represent an invaluable trading tool which enhances our overall returns. Some of our members have expressed concern when rolling out-and-up because the cost-to-close our near-month in-the-money call deducts the intrinsic […]
Factors to Consider When Closing a Trade Early: A Real-Life Example with ATVI
Exit strategies for covered call writing includes closing a trade when share price rises above the original strike price sold. When formulating these decisions, we must factor in the cost-to-close as it relates to the opportunity to generate more profit. On November 8, 2017, Marion shared with me a trade with Activision Blizzard, Inc. (NASDAQ: […]
Evaluating the Success of our Covered Call Trades
Whenever a covered call trade results in a maximum return, it is a successful trade…period…end of story. To most, this statement appears nonsensical and self-evident. But I’m here to tell you that there are a lot of covered call writers that question that success. In late December 2017, Paul shared with me a series of […]
Evaluating a Portfolio from a Numerical Perspective
When we formulate our covered call writing and put-selling portfolios, we are basing our decisions on non-emotional sound fundamental, technical and common sense principles. Similarly, we can analyze a portfolio and determine the investor’s stock and overall market assessments. On November 17, 2017, Carl sent me a list of his very first covered call writing […]
Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money Strikes
The 3 required skills for covered call writing and selling cash-secured puts are stock selection, option selection and position management. This article will use real-life examples highlighting the first 2 of these skill sets in a bull market environment. Article assumptions and guidelines Portfolio is set up in a bull market environment Target goals […]
Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks
One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For example, we may buy back the October $50.00 call option and then sell the November $55.00 call option. We would consider such action if the expiring strike […]
In-The-Money Call Strikes: Intrinsic Value Protects Time Value
Strike price selection is one of the 3 required skills for covered call writing and put-selling. When we sell in-the-money call options we are protecting our positions to the downside while still generating the time value initial profits we have established in our strategy goals. In return, we are relinquishing any opportunity to generate additional […]
What Criteria Should We Use to Close our Covered Call Positions Early?
When we sell out-of-the-money call options, we are initiating bullish covered call writing positions. Our goals are to generate option premium as well as share appreciation from current market value up to the call strike price. When share value moves well above the strike, leaving that strike deep in-the-money, there is no opportunity to generate […]
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Increasing Capital Gains When Selling Stock: Another Use for Covered call Writing
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Stock Repair Strategy: Using Stock Options to Reduce Losses When Stock Price Declines
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Ask Alan #151 – Rolling Out-And-Up Covered Call Trade Decisions
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Covered Call Writing with Only One Security
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Strike Selection for Portfolio Overwriting Low Cost-Basis Stocks
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The New Stock Market- Algorithmic and High Speed Trading
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Options That Expire Weekly and Conventional Expiration Cycles
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Why the 3% Guideline Applies to Puts but Not to Call Options
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Earnings Pre-Announcements Explained and Categorized
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Tax Implications of Writing Covered Calls against Long-Term Holdings
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Geoff Jay, You're braver than I. If I was going
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Roni Alan, in Sunny's case, I believe he did no
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Jay Thanks Alan, it is a great place to learn and shar
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Alan Ellman Jay, Our BCI community always appreciates your
