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Tag Archives: implied volatility
covered call writing and market volatility

Using the CBOE Volatility Index (VIX) for Our Strike Price Selection

Options trading basics teaches us that the VIX or CBOE Volatility Index reflects the market’s expectation of the upcoming 30-day volatility. It measures market risk and is also known as the investor fear gauge. With this in mind, covered call writers are faced with a dilemma. Increased market volatility will translate into higher option premiums […]

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technical analysis for covered call writing

Covered Call Writing with a Biotech Company: A Real-Life Example with Argenx (NASDAQ: ARGX)

Covered call writing (as well as put-selling) premiums are directly related to the implied volatility of the underlying stock or exchange-traded fund (ETF). Biotech stocks are particularly volatile due to the success (or lack thereof) of the pharmaceuticals they are developing. Highly volatile underlyings represent the good news of higher premiums and the bad news […]

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Volatility Skews: Defined, Explained and Updated

Implied volatility is a key concept for covered call writers and put-sellers. It is a forecast of the underlying stock’s volatility as implied by option prices in the marketplace. In 2012, I published an article relating to implied volatility where volatility skew was discussed.    Volatility skew as defined in my 2012 article The volatility […]

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covered call writing with blue chip stocks

Dow 30 Stocks and Covered Call Writing: Implementing the Premium Blue Chip Report

The risk inherent in covered call writing and put-selling is related to price decline in the underlying security. Investors with low-risk tolerance may turn to blue chip stocks which have proven track records of being reliable, cash-rich securities that frequently also generate dividends. This article will highlight how to utilize the monthly BCI Premium Blue […]

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covered call writing and the option Greeks

Understanding the Impact Implied Volatility has on Delta

For covered call writers and put-sellers, the option Greeks play a major role in our understanding of the risks and value of our option premiums. We know our option premiums consist of intrinsic value (for in-the-money strikes) + time value. Our initial time value returns reflect the time to expiration + the volatility of the […]

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covered call writing calculations

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 […]

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covered call writing calculations

Seeking the Highest Option Premiums is a Losing Strategy

One of the common mistakes made by covered call writers and put-sellers is to make investment decisions based primarily on the highest premium returns. Certainly, we all want to generate the highest levels of success but only when factoring in the risk we will be incurring. This article will look at high premium returns from […]

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managing covered call trades

Managing Winning Trades for High Implied Volatility Stocks

Covered call writing and cash-secured put-selling are conservative strategies geared to retail investors who have capital preservative as a key strategy requirement. When we use high implied volatility underlying securities the strategy will have a broader range of risk-reward exposure. This article was inspired by Randy P. who had outstanding results using Applied Optoelectronics Inc. […]

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Beware of High Premium Returns

Covered call writers and put-sellers must set goals regarding targeted premium returns before entering trades. These objectives are based on personal risk tolerance, market assessment and chart technicals. One of the most flagrant mistakes made by option sellers is to make trade decisions based on the highest premium returns. Covered call writing and put-selling are […]

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Covered call writing and technical analysis

Special 1-Time Cash Dividends for Stocks with Improving Technicals

Covered call writing and put-selling candidates must pass a series of fundamental, technical and common-sense screens in order to be considered eligible for our portfolios. In early January 2017, one of our members, Jim W, asked about using Ford Motor Corp. (F), a stock that does not pass our BCI screens but has several positive […]

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