Comments on: The Covered Strangle: Selling Both Call and Put Options while Owning the Underlying Stock https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/ Learn how to invest by selling stock options. Sat, 19 May 2018 10:18:50 +0000 hourly 1 By: MarioG https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164959 Sat, 19 May 2018 10:18:50 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164959 In reply to Kerry.

Kerry,

Had one other comment regarding you original question.

You said you held LGIH through Earning Report by not selling the option but holding onto the stock per the BCI Methodology.

Just want to make clear that, unless you are talking about a stock you want to hold and not sell at all, that the BCI methodology says to not hold onto the stock through earnings reports in addition to not writing any options. There is too much risk and the LGIH results show that.

The market performs what seems are illogical responses when earning are positive. I have been seeing sudden changes in prices just one or two days before expiration for the last few months when I was thinking of being in-the-money.

I also had LGIH in the past but it is not in my current holdings.

Mario

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By: Alan Ellman https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164884 Fri, 18 May 2018 10:30:03 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164884 In reply to Jon.

Jon,

It seems that stock splits are a thing of the past. However, there are always ways to manage a challenge, in this case rising share prices.

The use of exchange-traded funds will allow for instant diversification, thereby requiring less securities and lower cash requirements. Our current ETF Report lists 8 securities priced under $30.00.

We can also expand our screening beyond the IBD 50. BCI uses our database of over 3000 stocks in addition to the IBD 50 to create the watch list for our members and there will generally be several lower-priced securities.

A free-screening site is finviz.com for those who are not premium members. Enter parameters that simulate the BCI methodology. It’s not as precise as our member reports but an alternative to locating lower-priced stocks.

Alan

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By: Jon https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164881 Fri, 18 May 2018 06:43:57 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164881 Alan,

The IBD 50 is a fabulous choice to screen for stocks with both fundamental and technical traits the covered call writer would seek. Increasingly, however, the stocks on this list are $100+ which means a 5 figure commitment in order to write just one option. For a large percentage of investors, this could push their portfolio to a state where they are not properly diversified. Is there any other screen you are recommending as a starting point that may produce a wider variety of underlying stock prices?

Thanks for the books and the methodology.

Jon

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By: Alan Ellman https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164810 Thu, 17 May 2018 14:53:00 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164810 In reply to Terry.

Terry,

The charts we publish in our weekly ETF reports are 3-month charts. Each week, the starting and ending dates charted are moved up 1 week. Therefore, comparing last week’s +26% and this week’s +25% is not comparing apples to apples since there are different starting points.

As we see from the latest report, energy-related ETFs dominate.

Alan

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By: Terry https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164808 Thu, 17 May 2018 14:13:50 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164808 I have a question on the weekly ETF report regarding the charts.

Let’s take the top rated ETF XOP for example. Last week 5-9-2018 lists XOP up 26%. This week 5-16-2018 XOP is up 25%. To me this is down 1% from last week; however, the chart shows an uptrending pattern from last week and not down. Why is this?

Thanks;
Terry

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By: Alan Ellman https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164801 Thu, 17 May 2018 11:46:35 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164801 In reply to Kaveh.

Kaveh,

The current option price is most relevant if we buy back the short call. Therefore the “:ask” price is more appropriate. However, since our educated BCI community is familiar with how to leverage the “Show or Fill Rule”, using the mid-point of the bid-ask spread (slightly favoring the “ask” price)would be most accurate. For example, if the spread is $2.50 – $3.00, I would use $2.80 in the option current price cell.

Alan

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By: Kaveh https://www.thebluecollarinvestor.com/the-covered-strangle-selling-both-call-and-put-options-while-owning-the-underlying-stock/#comment-164800 Thu, 17 May 2018 09:15:13 +0000 http://www.thebluecollarinvestor.com/?p=16582#comment-164800 Good Morning

Thank you very much for clearing up the cycle question! I think I understand the option cycles now, it took me a while but I’ve got it.

On a different note, I’ve been using the premium site’s Daily-CC-checkup spread sheet for my practice trades. This spread sheet is fantastic! I have gone thru the return calculations that you have in there and I am very comfortable with them. I have one question regarding the ‘ Today’s option price’ tab in Daily-CC-Checkup spread sheet and the question is the following:

Do we use the Bid price for that tab or do we use the ask price for that tab? because the spread sheet uses the ‘Today’s option price’ to calculate the return on several alternatives using that tab as the cost of buying back the option. If that is the case should I use the ask price to be more accurate? I have been using the Bid price for that tab.

Again thank you very much in advance.

Best
Kaveh

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