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. […]

## Managing Winning Trades for High Implied Volatility Stocks

Posted on January 13, 2018 by Alan Ellman in Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

## Beware of High Premium Returns

Posted on November 18, 2017 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies

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 […]

## Special 1-Time Cash Dividends for Stocks with Improving Technicals

Posted on July 1, 2017 by Alan Ellman in Fundamental Analysis, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies, Technical Analysis

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 […]

## Calculations When an Unexpected Earnings Report is about to be Released

Posted on April 29, 2017 by Alan Ellman in Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Never write a covered call or sell a cash-secured put if there is an earnings announcement due prior to contract expiration. This is such an important rule in the BCI methodology. However, we all know that life is not perfect and sometimes we are thrown the proverbial “curve ball” Earnings reports come out every quarter or […]

## Probability Analysis when Using Covered Call Writing or Selling Cash-Secured Puts

Posted on April 8, 2017 by Alan Ellman in Investment Basics, Option Trading Basics, Stock Investing, Stock Option Strategies

Whether we are selling covered calls or cash-secured puts we frequently look to our broker platforms for ways of enhancing our trading success. As these platforms become more sophisticated and competitive, there are a myriad of software analytical programs offered including those geared to probability analysis. A typical program will use implied volatility stats to determine […]

## Short-Term Trades with High Returns: Evaluating a Real-Life Example

Posted on February 25, 2017 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Covered call writing is a conservative strategy for cautious investors. We want the higher than risk-free returns with the least amount of risk. One question that does come up in this regard is why not enter a short-term trade that offers impressive returns? To get an understanding if this is a beneficial approach there is […]

## Calculation Rules: Making Sense Of A Trade That Makes No Sense

Posted on September 10, 2016 by Alan Ellman in Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Understanding option calculations is a necessary skill to become an elite covered call writer. The Ellman Calculator will do all the legwork but accurate and meaningful results are dependent on appropriate inputs. To highlight this point, let’s look at a real-life trade sent to me by Catherine who trades on the Toronto Stock Exchange: […]

## Comparing Implied Volatility and Historical Volatility During Earnings Season

Posted on March 26, 2016 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies, Technical Analysis

When selecting stocks and options for covered call writing and put-selling we factor in volatility, both implied and historical. Historical Volatility (HV) is the actual volatility of a security over a given time period. HV is calculated by determining the average deviation from the average price based on one standard deviation (expected to be accurate 67% of the time). Implied volatility (IV) is […]

## Why Would Call Option Value Decline If Stock Price Rises? Evaluating Option Greeks

Posted on December 26, 2015 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Covered call writers and put-sellers know that option value is impacted by the change in stock price by the amount of its Delta. Delta, one of the option Greeks, is defined as the amount an option value will change for every $1.00 change in share value. If a call option priced at $2.00 with a […]

## A Review of Volatility and its Impact on Option-Selling

Posted on November 7, 2015 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

When we write covered calls or cash-secured puts, we are selling volatility. The time value component of a short-term option premium reflects the amount of time until expiration plus the volatility of the underlying security. Since most of us are comparing options with similar expirations, the volatility of the stock or exchange-traded fund represents the […]

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