Portfolio overwriting is a form of covered call writing where share retention is an additional requirement for the strategy goals. The option Greeks are financial metrics that measure the risk and pricing sensitivity of our option contracts. This article will analyze how the Greeks can assist us by enhancing our portfolio overwriting results. A real-life example with NVDIA Corp. (Nasdaq: NVDA) will be used.

What are the 5 option Greeks?

• Delta
• Gamma- 2nd generation Delta, the “Delta” of “Deltas”
• Theta
• Vega
• Rho- not a major Greek

 

Delta Defined & Applications

• Delta is the amount an option price will change for every $1.00 change in share price
  • –How to use the 20%/10% exit strategy guidelines
  • –Which strikes to use as stock surrogates (The Poor Man’s Covered Call, for example)
• Delta is the equivalent number of shares represented by the options position
  • –More for high-wealth portfolio managers
  • –Delta-neutral portfolios
• Delta is the percentage likelihood that, upon expiration, the option will expire in-the-money or with intrinsic value (subject to exercise)
  • Portfolio overwriting- avoid exercise of low-cost-basis shares
  • Deep OTM puts- avoid having shares “put” to us
  • Deep ITM calls- avoid stock price dropping below breakeven price point

Theta Defined & Applications

• Estimate of how much the theoretical value of an option will decline with the passage of 1 calendar day
• Assists us in determining when to enter our trades
• Assist us in the most appropriate exit strategies to use
  • 20%/10% BTC-GTC limit orders
  • “Hitting a Double” versus “rolling-down”

 

Vega Defined & Applications

• Amount an option price changes with a 1% change in implied volatility of the underlying security
• Extremely important to integrate implied volatility into our option trading decisions
• IV can also be used to determine an expected trading range for a specific contract
• Greater implied volatility = larger premiums = greater risk to the downside
• IV is inherent in our option time-value components
• Our initial time-value return goal range can be used to measure the risk of our trades
  • 2% – 4%/month, for me
  • 1/4th that amount for weekly expirations
  • Much lower for portfolio overwriting

 

How to use Delta for portfolio overwriting: Use low deltas to decrease the risk of exercise (expiring ITM): NVDA option chain

With NVDA trading at $174.88, the $195.00 OTM call strike has a delta (risk of expiring ITM and subject to exercise) of 9.5% (yellow cell) and a bid price of $0.58 (brown cell).

 

Delta calculations for NVDA (9.5% risk of exercise w/o exit strategies)

• This 25-day trade, shows an annualized return of 4.84% (brown cell) with an opportunity of an additional 11.51% of share appreciation potential (purple cell)
• Calculations accomplished with the BCI Trade Management Calculator (TMC)

 

How to use Theta for portfolio overwriting: Graphic representation of time-value decay

• The theta (time-value) decay starts slowly (yellow field)
• As expiration approaches, the rate of time-value decay accelerates dramatically (brown field)
• Since we are selling short-term options (weekly and monthly), theta guides us to entering the trades early in the contract cycle

 

How to use Vega for portfolio overwriting: Can guide us to appropriate strike selection

• Implied volatility (IV) is based on an annualized basis and 1 standard deviation (SD- falls in the calculated range 68% of the time; 16% on the high end and 16% on the low end)
• The high end of the range represents a 16% risk of expiring ITM and subject to exercise
• The BCI Expected Price Movement Calculator has a conversion formula to convert the IV from the annualized stat to one reflecting the specific contract in question
• The price movement is calculated using the at-the-money (ATM) IV
• If we wanted to take less risk of exercise, we could use 2 SDs by doubling the calculated price movement and incur a 2.5% risk of expiring ITM and subject to exercise
• ***We could always buy back the option prior to expiration and prevent exercise if there is substantial share price acceleration

 

The BCI Expected Price Movement Calculator: NVDA has an ATM IV of 36%

• For a 16% risk factor, we would select a strike near $191.00
• For a 2.5% risk factor (2 SDs), we would double $16.48 and select a strike near $208.00
• Always check the annualized return to make sure it aligns with our pre-stated initial time-value return goal range

 

Discussion

The option Greeks (mainly, Delta, Theta and Vega) are critical to understanding how best to structure our portfolio overwriting trades. Since these metrics are readily available, we should take advantage of them to create opportunities to elevate our returns to the highest possible levels.

 

 

 

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Covered Call Writing Alternative Strategies

Covered call writing is a cash-generating strategy that lowers our cost basis thereby improving our opportunities for successful investments. One of the many benefits of incorporating this strategy into our investment portfolios is that the system can be crafted to meet our trading style, market assessment, portfolio net worth and personal risk tolerance. This book details three such covered call writing-like strategies:

Portfolio Overwriting- using stocks in buy-and-hold portfolios
The Collar Strategy- using protective puts
The Poor Man’s Covered Call- using LEAPS options

Click here to learn more.

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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:

From an attorney who hired Alan as an expert consultant & witness in a multi-million-dollar options trial:

Alan,

1. Mad Hedge Investor Summit

Wednesday September 16, 2026

12 PM ET – 1 PM ET

The Collar Strategy: Covered Call Writing with Protective Puts

Protecting covered call trades from catastrophic share loss 

Protect our covered call trades by purchasing protective puts. This results in lower risk transactions, with lower, but still significant option returns. 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 max gain and the protective put guarantees a maximum loss.

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
• Event offer
• Q&A

Registration link to follow.

2. Toronto Money Show

September 24 – 25, 2026

MaRS Center, Toronto Canada

Generating a 3rd Income Stream in Existing Stock Portfolios

Details to follow.

3. Orlando Money Show

October 5 – 7, 2026

Hilton Orlando Lake Buena Vista

3 presentations:

• Portfolio Overwriting (2-hour Master Class)
• Setting Up High-Performance Option Portfolios
• Selling Cash-Secured Puts: The 2 Outcomes

Details to follow.

4. American Association of Individual Investors: NYC Chapter

Date and time to be confirmed.

5. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027- All-day event

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details to follow.