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

## Arbitrage: Part I

Posted on December 16, 2017 by Alan Ellman in Investment Basics, Option Trading Basics, Options Trade Execution, Stock Option Strategies

Understanding stock and option pricing requires an awareness of arbitrage and market efficiency. Although most retail investors do not have the tools to take advantage of arbitrage opportunities, a comprehensive understanding of how it works adds to our financial literacy and so I am sharing this 2-part series with our readers. What is arbitrage? Arbitrage is the […]

## Why Option Buyers Pay More for In-The-Money Strikes

Posted on August 19, 2017 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

When we sell an in-the-money covered call, we are taking a defensive posture and using the intrinsic value component of the premium to protect the time value initial profit. As an example, let’s look at New Oriental Education (NYSE: EDU) on April 7, 2017: EDU priced at $61.50 $60.00 (ITM) call priced at $3.55 Expiration […]

## Rolling Out-and-Up After Understanding the Math

Posted on December 31, 2016 by Alan Ellman in Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Options Trade Execution, Stock Option Strategies

Elite covered call writers understand the importance of position management in maximizing returns. As a result, I receive a significant number of inquiries regarding exit strategy execution. This article will highlight one such question I received from John which has two components to it. The main item relates to rolling-out-and-up, a frequently-used exit strategy in […]

## 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: […]

## Why do Call Buyers Exercise Early Prior to the Ex-Dividend Date?

Posted on May 16, 2015 by Alan Ellman in Covered Call Exit Strategies, Exit Strategies, Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Covered call writers know that early exercise is extremely rare. Call buyers are generally better off selling the option rather than exercising early. In this article we will evaluate why a call buyer may choose to exercise an in-the-money call option prior to expiration by evaluating the choices available to these option holders. Value of […]

## RHO: Why Interest Rates Effect Our Option Premiums

Posted on November 15, 2014 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

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 […]

## “Moneyness” Of Call And Put Options: Understanding Strike Prices

Posted on October 4, 2014 by Alan Ellman in Option Trading Basics, Options Calculations, Stock Option Strategies

Strike price selection is such a key part of options trading basics and options calculations. There are 3 types of strike prices for both put and call options: in-the-money, at-the-money (and the closely related near-the-money) and out-of-the-money. Moneyness tells option holders whether exercising will lead to a profit. Moneyness looks at the value of an option […]

## How To Maximize Covered Call Writing Returns By Understanding Time Value and Theta

Posted on September 6, 2014 by Alan Ellman in Option Trading Basics, Options Calculations, Stock Option Strategies

Mastering the concepts of the time value of our option premiums and how theta impacts our option profits will help elevate our returns to the highest possible levels. Let’s first define these terms: Definitions Time value: The portion of the option premium that is attributable to the amount of time remaining until expiration. It is […]

## Option Premiums: How Intrinsic Value Protects Time Value

Posted on March 22, 2014 by Alan Ellman in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Meaningful option calculations are essential in determining if the premiums meet our goals. To this end, we must understand the mathematics of these calculations to become elite covered call writers. Now don’t worry…we don’t have to become Albert Einstein to be successful. But we do have to have a general understanding of the components of […]

### Podcast

- 66. Comparing the Cost-To-Close Covered Call Trades with Time-Value Return Goals
- 65: The 20%/10% Guidelines for Covered call Writing and Selling Cash-Secured Puts
- 64. Creating Dividend Like Income for Non Dividend Stocks
- 63. Rolling Decisions on Expiration Friday
- 62. Should I Unwind My Covered Call Trade 1 Week Prior to Contract Expiration?
- 61. Realized Versus Unrealized Capital Gains (Losses) for Covered Call Writing
- 60. Combining ITM Call Strikes & Stock Dividends to Protect in Bear Markets
- 59. ANALYZING 2 Month and 4-Day Covered Call Trades
- 58. Is This Trade a Winner or a Loser?
- 57. Evaluation Stock Purchase Price and Breakeven When Rolling Options

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### Beginners Corner Enhanced & Updated

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### Beginners Corner Selling-Puts

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