Posted on October 26, 2019
by Alan Ellman
in Exchange-Traded Funds, Investment Basics, Option Trading Basics, Options Calculations

Implied volatility (IV) is directly related to the value of the premiums we receive when selling covered call and put options. The more volatile the underlying security, the greater the premium and risk exposure. I have written quite a bit about IV over the years and distinguished it from historical volatility (HV). This article will […]

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 […]

Posted on October 24, 2015
by Alan Ellman
in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Volatility is a key consideration for both stock selection and option-selling decisions. Despite its relevance to our covered call writing and put-selling selections, volatility does have its limitations and we must fully understand how we can best take advantage of the information gleaned from volatility statistics. Types of volatility Historical volatility: The annualized standard […]

Posted on February 28, 2015
by Alan Ellman
in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Understanding the Greeks, or factors that impact the value of our covered call premiums, is essential to mastering options trading basics and becoming an elite covered call writer. One of the Greeks (although not truly a Greek letter) is Vega, the amount an option price will change for every 1% change in volatility. As the […]

Posted on January 31, 2015
by Alan Ellman
in Investment Basics, Option Trading Basics, Options Calculations, Stock Option Strategies

Understanding the concept of implied volatility is essential for successful covered call writing and selling puts. First, implied volatility gives us a window into the “market’s” perception of future price movement. It will also allow us to calculate probability of a stock price reaching a certain level. Like all other parameters, implied volatility, although quite […]

Posted on June 22, 2013
by Alan Ellman
in Investment Basics, Option Trading Basics, Stock Option Strategies

Several studies have been undertaken to determine the effectiveness of the covered call writing strategy. I believe that it is important to evaluate the parameters that are used as well as how they are employed in these evaluations to assess the accuracy of the findings. In 2002, BXM was developed by the CBOE (Chicago Board […]

Posted on November 10, 2012
by Alan Ellman
in Option Trading Basics, Stock Option Strategies

An integral part of understanding option trading basics, is mastering the components that influence option value. Many option traders will look to make money as a result of a discrepancy between an option’s current market value and its theoretical value. In other words, is the option overpriced or undervalued? If, for example, an option is […]

Posted on October 13, 2012
by Alan Ellman
in Investment Basics

Mastering covered call writing has taught many of us how to self-invest. In the past, we depended on financial managers to handle our hard-earned money. In the hands of the right person this is not an inappropriate path to take for some of us. Certain investors both self-invest and hire a financial advisor. Did you ever […]

Posted on July 14, 2012
by Alan Ellman
in Option Trading Basics

What makes some stock option premiums worth so much more than others? Let’s say we have two stocks, A and B. Both are trading @ $25/share. We look to sell the same month at-the-money $25 strike and one (stock A) returns 2% and the other (stock B) 4%. WHY? The answer lies predominantly in the mysterious […]

Posted on November 5, 2011
by Alan Ellman
in Investment Basics

What’s going on here? Stock prices are historically inexpensive. Bond yields need a magnifying glass to detect. Earnings reports have been positively surprising for eleven consecutive quarters. There are trillions of institutional and retail investor dollars sitting on the sidelines waiting to propel the market directly to the moon. So why is the market trending […]