When establishing our covered call portfolios (cash-secured puts, too), our strike selection is influenced by current market conditions. In normal-to-bull markets, we favor out-of-the-money (OTM) strikes which allow for a 2-income stream potential (premium + share appreciation from current market value up to the OTM call strike). In bear- volatile markets, we may promote in-the-money (ITM) strikes which provide greater protection to the downside.

In this article, I will demonstrate how both ITM & OTM strikes can be used in a bearish-mixed market environment. I will use Shopify Inc. (Nasdaq: SHOP), real-life examples taken from one of my option portfolios on 5/20/2025. Of the 4 call contracts I sold that day, 3 were defensive (ITM) and 1 was aggressive (OTM).

The BCI premium stock report on 5/209/2025

• All fundamental, technical and common-sense screens were passed
• Note the ticker is in bold, indicating that all technical parameters were bullish

SHOP 1- Month Price Chart vs. S&P 500

• In the past 1-month, SHOP was up in price by 25.14% (red arrow and oval)
• In the past 1-mont, the S&P 500 was up by 12.45% (blue arrow and circle)

Initial Covered Call Trade Calculations with our BCI Trade Management Calculator

• The ITM $98.00 strike (3 contracts) has a 32-day initial time-value return of 2.32%, 26.42% annualized (brown cells)
• The ITM $98.00 strike has a downside protection of that 2.32% return of 8.99% (purple cell) and a breakeven price point at $95.73 (top yellow cell)
• The OTM $117.00 strike (1 contract) has a 32-day initial time-value return of 2.11%, 24.05% annualized (green cells)
• The OTM $117.00 strike has an upside potential of 8.66% (pink cell) and a breakeven price point at $105.41 (bottom yellow cell)

Discussion

When crafting our option portfolios, strike selection should reflect both our personal risk-tolerance as well as an analysis of current market conditions. In this article, 3 of the 4 SHOP covered call contracts sold reflected a bearish sentiment and 1 a more aggressive bias. I refer to these as laddering strikes and is another form of diversification.

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This book will detail how to enter, manage and calculate trade adjustments for all market conditions. After we select the underlying security and sell the corresponding option, we immediately move into position management mode. There are over 20 exit strategies defined, as well and when and how to implement these plans.

The BCI Trade Management Calculator facilitates the analysis of each exit strategy by showing initial trade entries, initial trade calculations for both each individual trade as well as that of the entire portfolio. From there we learn how to enter our trade adjustments and finally to calculate trade and total portfolio post-adjustment results.

Click here for 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:

1. Orlando Money Show

Orlando Resort @ ChampionsGate

October 16 – 18, 2025

• Opening ceremony keynote address
• 45-minute workshop class: Traditional & Low-Risk Covered Call & Cash-Secured Put Trades

Register here.

2. Money Masters Symposium Sarasota Florida

December 1 – 3,2025

Setting Up Option Portfolios Using Stock Selection, Diversification, Cash Allocation and Calculations

Analysis of 6 covered call writing trades

Minimize risk and maximize returns. These are our 2 main goals when crafting our option portfolios. There are several factors we can utilize which will put ourselves in an outstanding position to achieve these objectives. Here is a summary of those factors which will be addressed during this presentation:

• Select elite-performing stocks and ETFs
• Diversity stock positions as well as their industries
• Allocate a similar amount of cash per-position
• Ensure that initial calculations align with strategy goals and personal risk-tolerance
• Once trades are entered, go into position management mode- be prepared for exit strategy opportunities

Registration link to follow.