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Tag Archives: greeks
The Greeks and covered call writing

How To Use Implied Volatility In Our Covered Call Writing Decisions

Understanding the Greeks, or factors that impact the value of our covered call premiums, is essential to mastering options trading basics and becoming an elite covered call writer. One of the Greeks (although not truly a Greek letter) is Vega, the amount an option price will change for every 1% change in volatility. As the […]

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interest rates and option premiums for covered call writing and put-selling

RHO: Why Interest Rates Effect Our Option Premiums

Interest rates and the option Greeks play an important role in understanding option trading basics. Rho, not considered a major Greek, measures the change in an option’s price resulting from a 1% change in interest rates. When interest rates do change, it is normally by 25 basis points, not a full percentage point and that’s […]

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covered call writing and option value

Am I Losing Money When Option Value Increases After Entering A Covered Call Position?

The risk in covered call writing is in the stock purchased not in the option sold. Sound familiar? It’s in all my books and DVD Programs and mentioned in my seminars and webinars. Yet it appears when we look at our brokerage statements that this concept is not true. That is because we see a […]

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Implied volatility differences between strikes and expirations

Vega: An Option Greek And How It Impacts Our Option Pemiums

Covered call writing generates monthly cash flow by selling short-term options. The main factor in determining the amount of this premium is the implied volatility (IV) of the underlying security. The effect that IV has on the premium is known as vega, one of the option Greeks. What is vega? Vega is the expected change in […]

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Delta rises as strikes go deeper in-the-money

Delta and Our Covered Call Writing Decisions

When studying option trading basics and the Greeks we learn about our exposure to risk. Those of us who study options are constantly reading and hearing that delta, one of the Greeks, is one of the most powerful influences over option value. Because of this, I thought it prudent we discuss this subject in greater detail. Definition: Delta […]

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Greeks: Factors that Influence our Covered Call Premiums

We have all heard the term “the Greeks” as it applies to stock options. Most of us know that these factors somehow explain how certain parameters can impact the value of an option premium. To avoid facing some members of the BCI community claiming that “this is all Greek to me”, this article will serve as […]

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Beta: Another Tool to Enhance our Covered Call Returns

When we defined the Greeks in a previous article concerning investment basics, it included a discussion of the price sensitivity of the option premium as it relates to the underlying equity, time and other factors. One of the rules was that (all other factors being equal) an increase in share volatility will increase an option premium. An equity […]

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Theta-Time Decay of our Option Premiums

Educated covered call writers know that it is critical to sell our options early in the 1-month cycle. I always try to sell my options in the first week of a 4-week expiration cycle and no later than the beginning of the second week of a 5-week cycle. The reason has to do with the […]

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