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covered call writing calculations

Selling Deep In-The-Money Calls to Exit Stock Positions

Covered call writing is used predominantly to generate cash flow in a low-risk manner. But it can also be used to exit stock positions while mitigating losses in those trades. As an example, I will use a series of trades shared with me by Ashvin on May 16th, 2019. The underlying security was iShares MSCI […]

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Delta and the moneyness of strikes

Delta as the Sole Criteria for Covered Call Writing Strike Selection

Strike selection is the second required skill when writing covered call options or selling cash-secured puts. Over the years I have been asked to suggest a specific Delta for strike selection implying that this statistic would be the sole criterion to determine strike determination. This article will make a case why Delta, although important, should […]

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Can We Manage Our In-The-Money Strikes to Create a No-Risk Investment Strategy?

Covered call writing is a low-risk cash-generating strategy. It is not a no-risk strategy. As we become educated and master the 3-required skills (stock selection, option selection and position management), it is understandable why BCI members try to figure out strategies that can convert low-risk to no-risk. Here is a common inquiry I receive from […]

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covered call writing calculations

In-The-Money Covered Calls: Intrinsic Value Protects Time Value: A Real-Life Example with TEAM + New Tool Coming Soon

Meaningful option calculations are essential in determining if the premiums meet our covered call writing goals. To this end, we must understand the mathematics of these calculations to become elite option-sellers. Now don’t worry…we don’t have to become Albert Einstein to be successful. But we do have to have a general understanding of the components […]

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covered call writing exit strategies

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 […]

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covered call writing option

Increasing Capital Gains When Selling Stock: Another Use for Covered call Writing

Covered call writing is a low-risk option-selling strategy typically used to generate monthly cash flow. When we capture call premium into our brokerage accounts, we are lowering our cost basis thereby increasing the opportunities for successful trades. This strategy can also be crafted to increase our capital gains (or decrease capital losses) when we decide […]

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covered call writing calculations

Evaluating the Success of our Covered Call Trades

Whenever a covered call trade results in a maximum return, it is a successful trade…period…end of story. To most, this statement appears nonsensical and self-evident. But I’m here to tell you that there are a lot of covered call writers that question that success. In late December 2017, Paul shared with me a series of […]

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covered call writing and the option Greeks

Understanding the Impact Implied Volatility has on Delta

For covered call writers and put-sellers, the option Greeks play a major role in our understanding of the risks and value of our option premiums. We know our option premiums consist of intrinsic value (for in-the-money strikes) + time value. Our initial time value returns reflect the time to expiration + the volatility of the […]

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calculating covered call writing returns

Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money Strikes

The 3 required skills for covered call writing and selling cash-secured puts are stock selection, option selection and position management. This article will use real-life examples highlighting the first 2 of these skill sets in a bull market environment.   Article assumptions and guidelines Portfolio is set up in a bull market environment Target goals […]

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covered call writing exit strategies

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 […]

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