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Using the CEO Strategy with a $25k Portfolio

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The CEO Strategy is a streamlined version of covered call writing, where we use only 11 underlying securities, the Select Sector SPDRs. This article will utilize a real-life example of how we can craft a CEO Portfolio with $25,000.00 cash available. First, some definitions.

CEO Strategy

  • Acronym for Combing Exchange-Traded Funds with Stock Options
  • Pool of underlying securities is the 11 Select Sector SPDRs, exchange-traded funds
  • Only 4 of our 14 available covered call writing exit strategies are considered

Exchange-traded funds (ETFs)

Baskets of stocks that track an index, a commodity, an industry or a basket of assets like an index fund, but trade like a stock. They offer instant diversification.

What are the Select Sector SPDRs?

Unique ETFs that divide the S&P 500 into 11 index funds which focus on specific industry groups or sectors. All have associated options.

How do we establish a CEO Portfolio with $25,000.00 available?

Our goal is to achieve maximum diversification with the cash available, while still utilizing the best-performing Select Sector SPDRs and assuring a reserve cash balance to execute exit strategy opportunities, if they arise. With $25k available, a reasonable starting point would be to locate 3 securities priced in the $80s or less.

The 1-3-2024 BCI Premium Member ETF Report

Examining the CEO section (middle) of this report, there are 3 ETFs priced in the $80s or less, XLB, XLF and XLRE. Using the CEO Portfolio Setup Spreadsheet, we enter $25k and 3 securities on the top and the price-per-share on the lower half of the spreadsheet (shown below). In this case, the data resulted in an acceptable setup, with adequate cash reserve for potential exit strategy executions ($1,158.00).

The CEO Portfolio Setup Spreadsheet based on the 1-3-2024 BCI ETF Report

We are now diversified into approximately 27% of the S&P 500 (3/11) and have a cash reserve of $1158.oo for exit strategy executions, if needed.

Discussion

A CEO Portfolio with $25k cash available can be constructed using diversification and cash reserves as key components of our portfolio construction.



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

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

RE: Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts:

Reviewed in the United States on December 6, 2022

Dr. Ellman’s Exit Strategies book continues to hold an important spot on my investor resources bookshelf!
After many years following the BCI formula, I continue to research trading ideas and advice within its pages and – all with no BS, no hyping or sales gimmicks!
I’ve purchased copies for both my sons as they begin their own journey into becoming master of their own investing and “Taking Control of Their Financial Futures” as Dr. Ellman often reminds me!
I continue to thank him for sharing this in-depth information and strategies with anyone who wants to learn, without the traditional sales hype we see from “Wall Street Experts”!

James W.

Upcoming events

1. Mad Hedge Stock Investor Summit (online event)

June 4, 2024

11 AM ET – 12 PM ET

Covered Call Writing: Multiple Applications Based on Current

Market Conditions

Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ)

Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are:

  • Normal to bull markets
  • Bear and volatile markets
  • Low interest-rate environments

A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances.

Registration link to follow.

2. BCI-Only Webinar (Zoom)

July 18, 2024

Exit Strategy Choices After Exercise of Cash-Secured Puts

When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. Typically, we only sell puts on elite-performers that we would be agreeable to own in our portfolio.

This presentation will analyze 4 potential exit strategy opportunities to consider should the put option be exercised. Information on the following strategies will be highlighted:

  • Selling the stock
  • Holding the stock in our long-term buy-and-hold portfolio
  • Write a covered call (PCP or “wheel” strategy)
  • Implement the Stock Repair Strategy

In addition to these strategies, the following topics will also be included in the webinar:

  • Option basics for selling cash-secured puts
  • Option basics for covered call writing
  • Real-life examples
  • Calculations using the BCI Trade Management Calculator (TMC)
  • Event super discount offer

There will be information offered to all levels of options trades, from beginners to advanced.

Registration link to follow.

3. Investment Masters Symposium (live, in person event)

August 1, 2024

Presentation #1: 8:45 AM – 10:45 AM

Paris Hotel, Las Vegas

Covered Call Writing & Selling Cash-Secured Puts to Generate Consistent Cash Flow

Basic & advanced principles for trading low-risk stock options with capital preservation in mind

This presentation will detail stock selection, option selection and position management, the 3 required skills to become elite covered call writers and put sellers. It will also include ultra-conservative approaches to these strategies using Delta and implied volatility to create statistically beneficial trades. Rules and guidelines will be discussed to take the emotions out of our trades resulting in high-probability positive outcomes.

Detailed analysis will be provided regarding how to craft our trades to the current market environment, personal risk-tolerance and strategy return goals.

A multi-tiered option-selling strategy which combines both covered call writing and selling cash-secured puts will also be examined. It is known as the PCP (put-call-put) or “wheel strategy.”

Attendees will be introduced to a one-of-a-kind trade management tool, the Trade Management Calculator, which is used to enter, manage and generate final realized and unrealized trade results.

The course is structured to benefit both beginner and advanced option traders, using real-life examples to enhance the learning process.

Presentation #2: All Stars of Option Trading Event

Registration details to follow.

4. Stock Traders Expo- live event in Orlando Florida

October 17 -20

Details to follow.

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

8 Responses to “Using the CEO Strategy with a $25k Portfolio”

  1. John May 11, 2024 3:52 am #

    Morning Alan,

    Do you open new positions in the final week of a cycle?

    For example, I had something assigned mid cycle, so I have new cash. Opening a position for just one week is possible, but the ROO is usually low.

    But why not open a new position in the next month? Same cash, longer duration, so more ROO. Your thoughts, please?

    John

    • Alan Ellman May 11, 2024 6:53 am #

      John,

      If early exercise occurs with one of my monthly covered call trades (rare), I will use the cash to enter a weekly covered call trade in that final week of the monthly contract expiration. Now, there is nothing wrong with entering a 5- or 6-week trade for the next monthly contract expiration, but here is why I prefer the former:

      1. I have multiple option portfolios, calls & puts; weekly & monthly expirations. I dedicate a separate Trade Management Calculator (TMC) spreadsheet to each portfolio, so all the trades listed in each spreadsheet expire on the same date. This organizational methodology works well for me and allows me to easily manage between 100 – 150 contracts each month.

      I name each spreadsheet based on the expiration date. For example:

      TMC_Calls_5-24-2024 (weekly)

      TMC_Puts_6-21-2024 (monthly)

      If a monthly (5/17) trade was exercised early, I would enter a weekly trade on that same spreadsheet because it has the same expiration date, using the same 5/17 expiration.

      2. Weekly trades do generate lower premiums, but that shouldn’t dissuade us from using them. The key is to annualize the returns. This will give us a better perspective on how to evaluate our initial and realized final returns. Frequently weekly contracts will result in greater annualized returns than monthlys.

      Have a look at the email we sent out on Wednesday evening, notifying premium members of the new ETF report. The attachment showed a real-life weekly covered call trade with XLU. The initial 5-day return was for 0.48%, 25% annualized. Since the share price accelerated past the OTM strike, another 0.57% was realized, resulting in a final 5-day realized return of 1.05%, 54.6% annualized.

      Bottom line: Both approaches work. Use the TMC Calculator to run the numbers and then decide which aligns best with your trading style, personal risk-tolerance and trading goals.

      Alan

      • John May 11, 2024 7:27 am #

        Thank you for the great suggestions.

  2. Barry B May 11, 2024 9:47 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 05/10/24.

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

    Barry and The Blue Collar Investor Team

  3. Brian May 13, 2024 6:21 am #

    Alan,

    I wanted to thank you for adding sample trades to the mid-week mailings for our ETF reports. I have found them extremely helpful in evaluating trades.

    Brian (long-time premium member)

    • Alan Ellman May 13, 2024 12:08 pm #

      Brian,

      I appreciate the feedback.

      We initiated this feature at the request of several of our members, especially new members.

      Alan

  4. Alan Ellman May 14, 2024 11:57 am #

    Premium members,

    The Blue Chip (Dow 30) Report for the June 2024 contracts has been uploaded to your member site.

    Login and scroll down to “B” on the right side of the member page (“Resources/downloads”).

    Alan & the BCI team

  5. Alan Ellman May 15, 2024 5:00 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

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