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Tag Archives: theta
Option Greeks

Buying Low and Selling High Also Applies to Option-Selling

Covered call writers hold two positions. We are long (own) the stock and short (sold) the call option. It is intuitive to investors that it is to our advantage if the stock price accelerates or at least does not decline in value. There are five possible outcomes in the stock portion of our trade: Stock […]

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Is There Less Risk Using Deep In-The-Money Long Calls versus Covered Call Writing?

“There is less risk using deep in-the-money (ITM) long calls than buying stock and selling the corresponding short calls”. That is the case John made to me when I received his email in January 2018. As an example, John used a $100.00 stock and a call premium of $9.00. The basis of his theory was […]

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Theta and covered call writing

Executing Trades Based on Ex-Dividend Dates

Early assignment of our covered call positions is rare but possible. When it does occur, it is frequently related to an ex-dividend date. These are dates that we must own the shares in order to be eligible to receive the dividend on the distribution date. Premium members can access ex-dates of the eligible stocks in […]

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timing of option-selling trades

What is the Best Time to Execute Our Trades?

Covered call writing and selling cash-secured puts involve buying and selling stocks and options. We work meticulously to do everything possible to throw the odds in our favor to result in successful trades. Achieving the highest level of returns in a low risk manner is one of our mission statements. I have frequently highlighted the three required […]

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Exit Strategy Selectivity: Can We Implement Too Many Exit Strategies?

Covered call writers, historically, have ignored exit strategies as part of their investment approach. Certainly, not in the BCI community but most everywhere else. As we become aware of the major financial benefits of mastering the position management skill, we must be mindful of the possibility of over-management. Eating a slice of pizza is enjoyable, eating a […]

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covered call writing webinars

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 […]

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covered call writing option premiums

Exercise Of Options From The Call Buyer’s Perspective

Since we are selling call and put options we know there are traders or market makers who are buying them. In this article we will explore why only about 10% of all call options are actually exercised by the option holders even when the holders want to own the underlying shares.   Why are call […]

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Why and When We are NOT Losing Money If We Buy Back an Option for More Money than We Received

Exit strategies for covered call writing and selling cash-secured puts all start with buying back the option. Frequently, the cost to close our short option positions will be less than the premium generated initially from the option sale. This is because of the impact Theta (time value erosion) has on our option premiums. However, students […]

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option-selling factors of Theta, Vega and Delta

Greeks Spreadsheet Showing the Impact of Time to Expiration, Volatility and Stock Price Change on Option Value

Covered call writing and selling cash-secured puts involve both buying and selling of call and put options. We are dealing with two types of options as well as utilizing both long and short positions of each. When we factor in the major Greeks, it is important to understand the relationship between time to expiration, stock […]

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Greeks and covered call writing

Delta and Theta and their Impact on our Covered Call and Put-Selling Positions

The Greeks play a major role in both covered call writing and selling cash-secured puts. Understanding these factors and tailoring our strategy based on this insight will allow us to elevate our returns to the highest possible levels. In today’s article, we will focus in on Delta and Theta and discuss when they are an […]

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