We sell a covered call or cash-secured put and the cash is immediately placed into our broker cash account. Next, we check our account value, and it did not go up! In some cases, it went down! Where did the option premium money go? This article will explain the broker accounting process and rationale as they relate to selling options.
What is unearned income or revenue?
This is income received with an attached liability. Before we get into options, here’s an example we have all experienced: We purchase an airline ticket for a flight scheduled a month from the sale date. From the airline’s perspective, revenue is generated, but there is the attached liability to provide the flight. Until that service is provided, the income is considered unearned.
Let’s now move to our world of option-selling. We sell the option (airline ticket), but now have an attached obligation, our contractual commitment to buy (puts) or sell (calls) the underlying shares. The contract agreement ceases in one of three ways:
- Short call or put is bought back (closed)
- Short option is exercised
- Option expires worthless
Once our contract obligation ends, the option income is now realized and will be reflected in our broker statements. Until then, the statement will reflect the liability attachment.
Broker accounting process for our contractual obligations
The cash generated from our option sales is, in fact, in our cash accounts. However, when tabulating our total account value, the debit to buy back the option(s), is also reflected in that total. If we sold the option for $2.00 (bid price), the cost to buy it back (at the time of the sale) may be $2.10 (ask price). In this hypothetical, our account value will fall by $10.00 per contract. These liability connotations in our broker statement can be bracketed in red or with minus signs, as shown in the screenshot below.
Real-life examples from one of Alan’s accounts

- Stock (ETF) positions are highlighted in yellow
- Short calls are highlighted in brown
- Market value (purple oval) shows positive value for the securities and negative value for the short options
- Gain/loss (red oval) shows that if shares are sold today, all positions would result in a profit (yellow cells); if option positions were closed, all would result in a net debit (brown cells)
Discussion
When we sell our options, the premium cash is in our accounts and available for our use. Our broker’s statement will reflect the liabilities associated with these sales in the form of the cost-to-close (CTC) our short positions, until our commitments no longer exist. It should be noted that the CTC values will change according to the market value of these premiums.
Covered Call Writing: A Streamlined Approach
How to consistently beat the market using our CEO Strategy

This book Is written for investors seeking a low-risk approach to generating cash flow in a user-friendly and time efficient manner. It utilizes covered call writing and then tailors the strategy to achieve the following goals:
- Sell options to lower our cost-basis
- Generate weekly or monthly cash flow with reduced but still significant initial percent returns
- Reduce the database of underlying securities available from 8500 to 11
- Reduce the number of exit strategy considerations from 14 to 4
- Beat the market on a consistent basis
- Reduce portfolio volatility
This book provides a roadmap as how to accomplish these objectives. The “how”, the “why” and the “when” is addressed for every aspect of each trade. Chapters 9 through 20 show every trade the author executed for each monthly contract in 2022. Screenshots taken from the Scwab.com platform are archived in each chapter.
Here’s what you will not find in this book:
- A stock called “XYZ”
- Hypothetical trades
- Computer generated trades
- Unrealistic promises
- Only winning trades
Join us in this 1-year journey using our CEO Strategy, a streamlined approach to covered call writing.
Your generous testimonials
Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:
Upcoming events
1. BCI-only Webinar
1/16/2025
8 PM ET – 9:30 PM ET
The Collar Strategy: Covered Call Writing with Protective Puts
Protecting covered call trades from catastrophic share loss
This is the strategy Bernie Madoff pretended to use. He called it the split strike conversion strategy, but it was simply a collar. The covered call sets a ceiling on the trade and the protective put guarantees a floor on the trade.
Topics discussed
- What is the collar strategy?
- Uses for the collar
- Entering a collar trade
- Option basics for calls
- Option basics for puts
- Real-life example with NVDA
- What is an option-chain?
- Real-life example using the BCI Trade Management Calculator (TMC)
- Strategy pros & cons
- Educational products & discount coupon
- Q&A
Click here to register for free.
2. Long Island Stock Investor Group Part I
Zoom
February 13, 2025
7:30 – 9:00 ET
Private investment club
Covered Call Writing Dividend Stocks
3. Las Vegas Money Show
February 17 – 18, 2025
- Ultra Low-Risk Approaches to Covered Call Writing and Selling Cash-Secured Puts
- Covered Call Writing Technology Stocks
4. Long Island Stock Investor Group Part II
March 13, 2025
7:30 – 9:00 ET
Private investment club
Cash-Secured Puts: 2 Outcomes
5. MoneyShow Masters Symposium Miami 2025
Thursday May 15, 2025
Details to follow.

Alan,
What action, if any, should I take when I sell a cash secured put and the stock price goes way up?
Thank you for your time.
Joe
Joe,
The 2 most common exit strategy opportunities that we should consider when share price accelerates exponentially are:
1. The 20%/10% guidelines (closing the trade)
2. Rolling-up
For details with real-life examples, see chapters 17, 18 and 25 in my book, “Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts”.
Also, here is a link to an article I published on rolling-up:
https://www.thebluecollarinvestor.com/rolling-up-our-cash-secured-put-trades-a-real-life-example-with-etsy-inc-nasdaq-etsy/
Alan
Premium Members,
This week’s Weekly Stock Screen And Watch List has been uploaded to The Blue Collar Investor Premium Member site and is available for download in the “Reports” section. Look for the report dated 12/27/24.
Be sure to check out the latest BCI Training Videos and “Ask Alan” segments. You can view them on The Blue Collar YouTube Channel. For your convenience, the link to the BCI YouTube Channel is:
https://www.youtube.com/user/BlueCollarInvestor
Reminder: Premium Member’s pricing is locked into your current rate and you will never see a rate increase as long as the membership remains active.
Barry and The Blue Collar Investor Team
Alan,
How important is the column in our stock reports titled “# weeks on run list”? In other words, how should we use this information?
Thanks for all you and Barry and the BCI team do for us.
Cheryl
Cheryl,
It is one of the factors which reflects strength and staying power. In conjunction with our rigorous screening requirements, it is a secondary parameter in our trade decisions, but one that should be considered.
In response to your inquiry, I created a 6-month comparison chart (see below) of the S&P 500 versus the 3 stocks that have been on our stock list for 17 weeks. During this time frame, the S&P 500 has been up by 8.38% compared to these 3 stocks, up 26.64%, 33.55% and 38.92%.
Eventually, these stocks will fall off our list, but there will be others to replace them.
CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.
Alan
Hi Alan,
Hope the holidays are treating you well!
Question, when I am shopping for cash secured puts, with a -.10 delta, I
seem to be having a issue generating premium return of .5%-1% on the
weekly or 2%-4% on the monthly. Is it the low delta that is driving the
bid price premium received when selling these? If I took on more risk
say a 75% chance of expiring worthless, with a delta of -.25 would that
help consistently increase the premium? I don’t want the assignment,
that’s why I am shopping at the -.10 delta.
—
Thanks,
Dave
Dave,
There are 2 distinct criteria set up in this proposed strategy: Annualized returns between 25% and 50-% and a risk (of exercise) factor of 10%.
These 2 goals will rarely align in one trade.
We can craft our cash-secured put trades requiring one or the other but (rarely) both.
Using higher Deltas will definitely result in greater initial returns.
Which requirement is most important? % returns or avoiding exercise?
Once that determination gas been made, a workable combination of initial returns and risk can be established.
Alan
Alan,
After seeing this week’s video, I was wondering if you had a video for what to do on how to manage OTM CC on Expiration Friday.
Thanks.
Todd
Todd,
When a covered call strike is expiring out-of-the-money, exercise is extremely unlikely.
There is no need to buy back the option unless we don’t want to be exposed to weekend risk of share price decline, in which case we close both legs of the trade prior to 4 PM ET on expiration Friday.
If this is not a concern, simply “allow” the option to expire worthless and use our weekend stock report (typically published late Saturday evening)) to determine portfolio makeup for the upcoming contract cycle. This may or may not include the underlying security in question.
Alan
Premium members:
This week’s 4-page report of top-performing ETFs, along with our sample trade of the week, has been uploaded to your premium site. The Select Sector SPDR section is now crafted to align with our streamlined (CEO) approach to covered call writing. The report also lists Top-performing ETFs with Weekly options, mid-week market tone as well as the implied volatility of all eligible candidates.
We have also included a sample trade taken from one of our BCI watchlists.
Premium member video link:
https://youtu.be/EXMO-KwZuJs
For your convenience, here is the link to login to the premium site:
https://www.thebluecollarinvestor.com/member/login.php
NOT A PREMIUM MEMBER? Check out this link:
https://www.thebluecollarinvestor.com/membership.shtml
Alan and the BCI team