Option selection is the second required skill when selling call and put options. On 9/26/2017, George shared with me a trade he executed with Biogen, Inc. (BIIB). An in-the-money strike was sold and share price immediately accelerated. George was inquiring about how deep in-the-money (ITM) the strike prices should be set. George’s initial trade […]
Managing Winning Trades for High Implied Volatility Stocks
Covered call writing and cash-secured put-selling are conservative strategies geared to retail investors who have capital preservative as a key strategy requirement. When we use high implied volatility underlying securities the strategy will have a broader range of risk-reward exposure. This article was inspired by Randy P. who had outstanding results using Applied Optoelectronics Inc. […]
Why Option Buyers Pay More for In-The-Money Strikes
When we sell an in-the-money covered call, we are taking a defensive posture and using the intrinsic value component of the premium to protect the time value initial profit. As an example, let’s look at New Oriental Education (NYSE: EDU) on April 7, 2017: EDU priced at $61.50 $60.00 (ITM) call priced at $3.55 Expiration […]
Rolling Out-and-Up After Understanding the Math
Elite covered call writers understand the importance of position management in maximizing returns. As a result, I receive a significant number of inquiries regarding exit strategy execution. This article will highlight one such question I received from John which has two components to it. The main item relates to rolling-out-and-up, a frequently-used exit strategy in […]
Calculation Rules: Making Sense Of A Trade That Makes No Sense
Understanding option calculations is a necessary skill to become an elite covered call writer. The Ellman Calculator will do all the legwork but accurate and meaningful results are dependent on appropriate inputs. To highlight this point, let’s look at a real-life trade sent to me by Catherine who trades on the Toronto Stock Exchange: […]
The Relationship Between Delta and the Time Value of our Options
Covered call writers and put-sellers are always looking for an edge. Some may wonder which option Delta would make the best option-selling candidate. Intuitively or from experience we know that at-the-money strikes (Deltas near 0.50) generate the highest initial returns. I’ve stated that over-and-over again in my books and DVDs. Can this be demonstrated mathematically […]
Implied Volatility: General Market Conditions That Make Option Values Move Up Or Down
Option trading basics teaches us that selling call and put options is actually selling time value. Time value consists mainly of time to expiration stats and the implied volatility (IV) of the underlying security. Since most of us are selling monthly options, the main distinguishing factor in our option prices is the implied volatility…we are […]
Closing Our Entire Covered Call Position When Share Price Rises: The Mid-Contract Unwind Exit Strategy
Exit strategies or position management is one of the three major components of this strategy we must master to become elite covered call writers. The other two are stock (or ETF) and option selection. In my books and DVDs I mostly focus on scenarios that can result in losses and how to mitigate those losses or […]
How To Maximize Covered Call Writing Returns By Understanding Time Value and Theta
Mastering the concepts of the time value of our option premiums and how theta impacts our option profits will help elevate our returns to the highest possible levels. Let’s first define these terms: Definitions Time value: The portion of the option premium that is attributable to the amount of time remaining until expiration. It is […]
How To Avoid Early Exercise When Dividends Are About To Be Distributed
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 […]
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The New Stock Market- Algorithmic and High Speed Trading
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Options That Expire Weekly and Conventional Expiration Cycles
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Why the 3% Guideline Applies to Puts but Not to Call Options
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Earnings Pre-Announcements Explained and Categorized
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Tax Implications of Writing Covered Calls against Long-Term Holdings
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Jay Hi Joanna, Welcome if new here! You will find m
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MarioG Found some interesting web sites this week. Com
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Joanna I'm planning on taking my first shot at cover
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