Covered call writing is a low-risk strategy that allows us to generate monthly cash flow by selling stock options. Since we are obligated to sell our shares to the option buyer (holder), one of the understood possibilities is that we will “lose” our shares at the strike price or the price we have agreed to […]
Special 1- Time Cash Dividends and Our Covered Call Positions
Every so often we will see a company declare a “special dividend” which is separate from the typical recurring dividend cycle, if there is one. It is frequently a reflection of exceptionally strong earnings and/or a company with a large cash balance. It is a positive sign regarding the financial health of this corporation. Some […]
In-The-Money Strikes and Covered Call Writing
Option trading basics incorporates fundamental, technical and common sense decisions. One of these, as it relates to covered call writing, is selecting a strike price for the short options position. In bearish and volatile markets I tend to favor the in-the-money strike. Before I address this matter, let’s review the pros and cons of each […]
Out-Of-The-Money Strike Prices: Pros and Cons for Covered Call Writing
Whenever a study is performed on covered call writing a stock is selected and the nearest out-of-the-money (O-T-M) strike price is sold. This is repeated over and over and then the results are compared to the overall market performance. The usual conclusion is that covered call writing slightly outperforms the overall market but with much […]
Strike Price Selection- A Critical Covered Call Decision
Covered call writing requires a logical sequence of stock and option decisions. Once we have screened our stocks to locate the greatest performing stocks in the greatest performing industries we must make a decision as to which strike price to use. Our choices include: in-the-money at (near)-the-money out-of-the-money Let’s look at the options chain for […]
How to Read an Option Chain
So how much cash can we generate selling options on the stocks that have passed our fundamental and technical screens? The answer lies in the option chain. This is a list that quotes option prices for a given security. For each underlying security, the option chain lists the various strike prices, option premiums, expiration dates […]
The Basics of the Call Option plus a Current Real Life Example
Definitions: Implicit in the term covered call writing is the fact that we are selling call options. They are covered because we first own the underlying equities prior to selling the option. Since this is my first article of the new year and given the fact that we have so many new members of the […]
Overnight Millionaire or Victim of the Rig? Plus: My Readers Pick their Favorite Stocks
Your best friend calls you to tell you about a company that has developed a technology so unique that the profits about to be generated will make all investors filthy rich. He read about it on a blog site that his buddy from the the local Pizza Parlor referred him to. Needless to say these […]
USING STOCK OPTIONS TO NEUTRALIZE NEGATIVE CASH FLOW PROPERTIES / PART II – Real Life Example
Make money so you don’t lose money. No, this is not a quote from Yogi Berra! It’s me, Alan, speaking and I make no apologies for this seemingly sophomoric statement. On April 12, 2008, I wrote an article wherein I described a negative cash flow property I own in Florida. I was losing $800 per […]
USING STOCK OPTIONS TO NEUTRALIZE NEGATIVE CASH FLOW PROPERTIES
The light bulb went on! I have a property in Florida that is negatively cash flowing. I also have a skill generating cash by selling stock options. This is a marriage made in heaven! When I started trading stock options, the cash was used to pay for my son’s college education, the purchase of my […]
Podcast
- 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
- 94. Covered Call Writing Net Debit Limit Orders
- 93. WHEN CALL STRIKES MOVE DEEP ITM EARLY IN A CONTRACT
- 92. Selling Deep OTM Cash-Secured Puts to Create High-Probability Returns
- 91. Portfolio Overwriting Analyzed
- 90. Entering a Collar Trade
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