In March of 2026, during the US – Iran War, I was favoring deep in-the-money (ITM) covered call strikes and deep out-of-the-money (OTM) cash-secured put strikes. This allowed me to continue to generate significant initial time-value returns, while retaining considerable protection to the downside. In this article a covered call writing example will be analyzed using EQT Corp. (NYSE: EQT).
Why choose EQT?
Based on our Weekly Stock Screen & Watch List (provided to our premium members):
- Located in the energy sector, ranked “A” at that time
- Mean analyst rating (MAR) of 1.69 (1-5, with 1 being the best)
- On balance volume (OBV) bullish
- Adequate stock & option liquidity
- No interference from earnings or ex-dividend dates
1-month comparison chart with the S&P 500 on 3/26/2026
Strike Price analysis for ultra-defensive covered call trades
- At-the-money (ATM) and out-of-the-money (OTM) strikes have only time-value components
- In-the-money (ITM) strikes have both time-value (extrinsic-value) and intrinsic-value components (amount the strike is lower than current market value)
- ITM strikes offer greater protection to the downside due to the lower breakeven price point (stock price – total premium)
- In volatile and uncertain wartime conditions, ITM strikes should be given serious consideration
- ITM strikes have higher deltas than ATM and OTM strikes
Delta analysis for ultra-defensive covered call trades
- One of the (3) definitions of delta is the approximate probability of the option strike expiring ITM and subject to exercise
- Using ITM strikes affords greater protection to the downside, but makes exercise more likely, so share retention cannot be a requirement
- In this scenario, the lower the strike, the greater the protection to the downside, the lower the time-value premium return and the higher the delta
- We seek higher delta strikes that will still generate significant time-value annualized returns. We do not want the stock price to move lower than the deep ITM strike and then become OTM (For example, a $48.00 stock dropping below a deep ITM $40.00 strike)
Delta analysis for EQT on 3/26/2026
- There is an approximate 87% probability of a successful trade (13% risk of share price moving OTM (lower than the $60.00 strike)
- I was able to “negotiate” a bid price of $8.05 for 5 contracts, after purchasing 500 shares at $67.30
Initial calculations using the BCI Trade Management Calculator (TMC)
- Red circle: 23-day trade
- Green oval: time-value and intrinsic-value
- Yellow cell: Breakeven price
- Brown cells: Initial 23-day and annualized returns
- Purple cell: How much share price can decline and still realize the 19.84% annualized return
- Blue cell: $375.00 of time-value premium generated into our cash account ($0.75 x 500)
- The 20% BTC/GTC limit order was placed at $1.60 (20% of $8.05) to protect against significant share price decline
Broker confirmation of trades
Discussion
- This was a defensive 5-contract ultra-defensive covered call trade
- Modest-robust IV stocks & ETFs can generate substantial initial and final returns
- ITM, high-delta covered calls should be given serious consideration in challenging markets
- Trades must be monitored whether high- or low-risk (20%/10% guidelines)
- When writing ultra-defensive cash-secured puts, high delta strikes should be considered. Delta will approximate the probability of the strike expiring ITM, which is what we want
- When using this strategy approach, share retention is not a requirement
Selling Cash-Secured Puts Basic and Advanced Principles: Video Course
This course contains 6- parts in the video course:
Section I: Option basics (definitions and foundational information)
Section II: Traditional put-selling (stock & option selection + position management)
Section III: PCP (wheel) strategy (adding covered calls to selling cash-secured puts)
Section IV: Buy a stock at a discount instead of a limit order (buy a stock at our target price or get paid not to buy the stock)
Section V: Ultra-low-risk put/Delta strategy (High probability, low-risk trades)
Section VI: Ultra-low-risk put/implied volatility strategy (High probability, low-risk trades)
For video overview, click 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 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:
Link to Alan’s AAII article:
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
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.
