beginners corner

Trading Weekly Options on a 4-Day Trading Week

click ↑ 4 Featured

Can we generate meaningful returns writing covered calls or selling cash-secured puts on a 4-day, holiday-shortened trading week? The answer is a resounding yes. This article will focus on a real-life example with PulteGroup, Inc. (NYSE: PHM), starting the day after Labor Day, 9/ 5/2023 through 9/8/2023. This security was an eligible security on our Premium Stock Report dated 9/1/2023.

Bullish price chart of PHM

Aside from an overall market decline in August 2023, PHM had been on a bullish tear since November 2022.

PHM option-chain on 9/5/2023

  • PHM was trading at $82.63
  • The OTM $84.00 call had a bid price of $0.55 (brown cells)
  • The OTM $81.00 put had a bid price $0.50 (yellow cells)
  • Both options had a 4-day expiration on 9/8/2023
  • Both options had adequate liquidity (open interest- purple cells)

PHM call calculations with the BCI Trade Management Calculator (TMC)

  • The Trade Management Calculator shows a 4-day trade if taken through expiration (red circle)
  • The breakeven price point is $82.08 (yellow cell)
  • The 4-day initial time-value return is 0.67% (brown cell)
  • This annualizes to 34.84% for 52 x 4-day trades

PHM put calculations with the BCI Trade Management Calculator (TMC)

  • The Trade Management Calculator shows a 4-day trade if taken through expiration (red circle)
  • The breakeven price point is $80.50 (yellow cell)
  • The 4-day initial time-value return is 0.62% (brown cell)
  • This annualizes to 32.24% for 52 x 4-day trades

Discussion

When holidays result in 4-day trading weeks, it is still likely that we can generate meaningful returns using weekly expirations. This applies to both calls and puts. The BCI Trade Management Calculator (TMC) is extremely useful in analyzing initial trade results and can be used to adjust and manage trades as well (not shown in this article).



The Complete Encyclopedia for Covered Call Writing- Classic Edition (Amazon.com best-seller)

Learn more by clicking here.


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 share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Alan,

Thanks for all you do. Your reports and BCI comments section add a professional and personal tone from your stock market experience. The market does not surprise me as much as it used to.

John

Upcoming events

1. Long Island Stock Traders Meetup Group (private investment club- Part I)

Thursday February 15, 2024

7:30 PM ET – 9:00 PM ET.

Club members only.

2. Las Vegas Money Show & Stock Traders Live In-Person Event

February 22 & 23, 2024

Paris Hotel

Thursday, February 22, 2024, at 4:55 pm – 5:25 pm PST

The PCP (put-call-put or “wheel”) Strategy

Friday, February 23, 2024, at 12:00 pm – 12:45 pm PST
Covered Call Writing: A Streamlined Approach

3. Long Island Stock Traders Meetup Group (private investment club- Part II)

Thursday March 14, 2024

7:30 PM ET – 9 PM ET

Club members only

4. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

Alan speaking at a Money Show event*********************************************************************************************************************

testimonials, events, etc.)

7 Responses to “Trading Weekly Options on a 4-Day Trading Week”

  1. Barry B January 28, 2024 12:44 am #

    Premium Members,

    The Weekly Report for 01/26/24 will be delayed due to technical issues with the system that we use to prepare the Weekly Report. At this point, we don’t have an estimate of when the report will be available. The BCI Team will keep you updated on our progress as well as when the report will be uploaded.

    Best,

    Barry and The Blue Collar Investor Team

  2. Barry B January 28, 2024 12:45 pm #

    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 01/26/24-RevA.

    Also, 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 will never see a rate increase as long as the membership remains active.

    Best,

    Barry and The Blue Collar Investor Team

  3. Anna January 30, 2024 2:23 am #

    Alan,

    Which is the best implied volatility to use for the Expected Price Movement Calculator? The Schwab options chains show several different ones.

    Thank you.

    Anna

    • Alan Ellman January 30, 2024 6:06 am #

      Anna,

      Use the at-the-money (ATM) or near-the-money (NTM) strike for the contract you are considering.

      Alan

  4. Stuart January 30, 2024 10:15 am #

    Alan,

    I noticed in our etf reports that the open interest for some of the etfs are less than 100. Why are these included?

    Thanks for all you do.

    Stuart

    • Alan Ellman January 30, 2024 1:32 pm #

      Stuart,

      We use 2 factors when determining adequate option liquidity for our Premium ETF Reports:

      1. Open interest (OI) of 100 contracts or more.

      2. Favorable bid-ask spreads.

      If we find that if the OI falls short, but the b-a spread is favorable, it is included in our list, assuming all other requirements are satisfied.

      Our goal is to allow for favorable trade executions.

      Alan

  5. Alan Ellman January 31, 2024 4:40 pm #

    Premium members:

    This week’s 4-page report of top-performing ETFs 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.

    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

Leave a Reply

Optionally add an image (JPEG only)