Option calculations help guide us to an accurate assessment of our covered call writing profits. It’s more meaningful to use percentages rather than dollar amounts when executing these calculations. For example, a $1000.00 profit on a $10,000.00 investment (10%) is much more significant than a $1000.00 return on a $100,000.00 investment (1%). That’s why percentages […]
Rolling Decisions on Expiration Friday: A Real-Life Example with Veeva Systems
Position management is the 3rd required skill for our covered call writing and put-selling success. On 7/19/2019, Larry shared with me a series of trades he executed with Veeva Systems Inc. (NYSE: VEEV). He astutely “hit a double” and was now looking to roll the option to the following month. Larry’s trades and inquiry (in […]
Evaluating Stock Purchase Price and Breakeven When Rolling Out-And-Up
When we write a covered call, our breakeven is stock purchase price – entire call premium. If we buy a stock for $48.00 and sell an option for $2.50, the breakeven is $45.50. In June 2019, John shared with me a series of trades he executed with Planet Fitness, Inc. (NYSE: PLNT) where he wrote […]
Rolling Up in the Same Contract Month: A Real-Life Example with KMX
Position management or exit strategies for covered call writing and selling puts is the third required skill to achieve the highest possible return levels (stock and option selection are the first two). First, we must determine if an exit strategy opportunity actually exists and then, if so, which one to execute. On May 3rd 2019, […]
Rolling Out-And-Up: Explaining “Bought-Up” Value
Covered call writing calculations should be as accurate as possible so that we can assess the success and feasibility of our trades. When we roll in-the-money (ITM) options out-and-up there is frequently an option debit which, on first glance, may make the trade appear to be a losing one. However, by factoring in the impact […]
Understanding the “Paid-Up” Risk When Rolling Out-And-Up: A Real-Life Example with FIVE
One of our covered call writing exit strategies when the strike is in-the-money on expiration Friday is rolling out-and-up. This is when we buy back the near-month call (buy-to-close) and sell the next month’s higher strike. There are times when share appreciation has dramatically increased above the near-month strike price such that buying back the […]
Rolling Out-And-Up And Then Stock Price Declines
Rolling our covered call trades involves multiple months of trading statistics. The calculations may be deceiving initially but on deeper analysis, rolling our options can represent an invaluable trading tool which enhances our overall returns. Some of our members have expressed concern when rolling out-and-up because the cost-to-close our near-month in-the-money call deducts the intrinsic […]
Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks
One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For example, we may buy back the October $50.00 call option and then sell the November $55.00 call option. We would consider such action if the expiring strike […]
Rolling Option Considerations: A Real-Life Example with BEAT
Exit Strategies for covered call writing is the third required skill for successful implementation of this strategy (stock selection and option selection are the first two). This is also known as position management. One of the most common situations we face each month is when the strike price we initially sold is expiring in-the-money (stock […]
Rolling Out-And-Up in Our Buy-And-Hold Portfolios
Portfolio overwriting is a covered call writing-like strategy where we sell call options against long-term buy-and-hold securities. Generally, these are low-cost basis stocks that are dividend-bearing and trading in non-sheltered accounts. We want to leverage these stocks and exchange-traded funds (ETFs) to generate additional income but also want to avoid assignment of the shares to […]
Podcast
- 54. Selecting the Best Strike Prices for Our Collar Trades
- 53: ITM Cash-Secured Puts: Allow Exercise or Roll the Option?
- 52. Making Money Selling Options with Technology Stocks
- 51. Timing Our Covered Call Trades
- 50. Exit strategies Must Be Timed Properly
- 49. Analyzing a Multi Leg Covered Call Rolling Down Series of Trades
- 48. Rolling Deep OTM Cash Secured Puts
- 47. Rolling Up in the Same Contract Month
- 46. Should Delta Be the Sole Criteria for Covered Call Writing Strike Selection
- 45. Implied Volatility and Expected price Movement During the Life of Option Contracts
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