beginners corner
Tag Archives: strike selection
covered call writing and collars

Protective Puts: Selecting the Best Strike Price

Covered call writing involves buying a stock and selling a call option. When a put is also purchased to avoid significant downside loss, it is referred to as a protective put and the strategy as a whole is referred to as a collar. When a put option is purchased on the same day that a stock is purchased, […]

19 Comments Continue Reading →

The 10 Most Common Mistakes Made By Covered Call Writers And How To Avoid Them

Your neighbor bursts into your house and exclaims “I just read this article…You buy a stock and sell an option and cash flows into your account instantly. It’s a miracle! I’m getting started tomorrow”  If you are a good neighbor and knowledgeable about covered call writing you will immediately tie him to a chair, put tape over […]

11 Comments Continue Reading →
Calculating strike selection returns

Selecting The Best Strike Price

In last week’s article concerning option trading basics I highlighted the in-the-money strike in our covered call writing strategy. In this article I will expand our options calculations to all three types of strike prices. First, let’s review each of these categories: Out-Of-The-Money-Strike Prices: There is a reason why these are  popular strikes for many investors. […]

22 Comments Continue Reading →
EBAY chart showing a mixed technical picturene

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 […]

16 Comments Continue Reading →