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 […]
Executing Exit Strategies in a Timely Manner
After executing our covered call writing trades, we immediately prepare for position management opportunities…exit strategies. One of these strategies in our arsenal is the Mid Contract Unwind exit strategy. This is used when share value appreciates dramatically resulting in a time value cost-to-close of near zero. In other words, the option originally sold will be […]
Why do Call Buyers Exercise Early Prior to the Ex-Dividend Date?
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 […]
Covered Call Writing And Dividend Capture: Evaluating A Proposed Strategy
Capturing dividends using covered call writing has been a topic on great interest lately. I recently wrote an extensive white paper on this topic located in the “resources/downloads” section of your premium site. In this article I will evaluate an interesting approach to a strategy recently sent to me by one of our members who […]
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 […]
Closing Our Entire Covered Call Position When Share Price Rises: The Mid-Contract Unwind Exit Strategy
Exit strategies or position management is one of the three major components of this strategy we must master to become elite covered call writers. The other two are stock (or ETF) and option selection. In my books and DVDs I mostly focus on scenarios that can result in losses and how to mitigate those losses or […]
Examining A Covered Call Trade
Mastering covered call writing requires us to learn from our mistakes and not repeating them. We can then utilize a series of guidelines and rules that will guide us to the highest possible returns with the least amount of risk. Maximizing profits with capital preservation in mind is what the BCI methodology is all about. […]
Using Multiple Exit Strategies in the Same Contract Month
Covered call writers can be good at what they do or great at it. They can generate decent returns or the highest possible returns. One of the mission statements of The Blue Collar Investor is to assist each other in achieving the greatest levels of success. The implementation of exit strategies when indicated is critical to this […]
Mid-Contract Unwind Exit Strategy: A Real Life Example
To maximize our covered call writing profits it is critical to take advantage of our exit strategy opportunities. Last week I posted a few comments regarding the mid-contract unwind exit strategy and received several emails asking for more information about the trade I alluded to. In this week’s article I will walk through the steps […]
Bernie Madoff Revisited
Oh no, not another Bernie article! Sorry folks, I couldn’t resist. I have such an interest in this story on so many levels. Madoff was claiming to use a strategy related to covered call writing. The Madoff whistleblower, Harry Markopolos, was involved with a covered call strategy when Bernie was dumped on his lap. I have been […]
Podcast
- 104. Special 1 Time Dividends and Contract Adjustments
- 103. The Collar Strategy Using Long-Term Put Expirations
- 102. Analyzing Market Assessment Based on Portfolio Setup
- 101. Covered Call Writing: "Hitting a Double" on the Last day of a Contract
- 100. Analyzing LEAPS for The Poor Man's Covered call Strategy (PMCC)
- 99. Anatomy of a Reverse Stock Split
- 98. Analyzing LEAPS Options for the Poor Man's Covered Call
- 97. Managing Our Poor Man's Covered Call Trades When Share Price Drops Substantially
- 96. Protecting Our Covered Call Trades: Protective Puts and In-the-Money Strikes
- 95. Covered Call Writing to Generate Premium and Dividend Income
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