Comments on: VIX Covered Call Writing: Selling Options Against Market Volatility https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/ Learn how to invest by selling stock options. Thu, 07 Mar 2019 20:08:36 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199461 Thu, 07 Mar 2019 20:08:36 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199461 Harry,

I don’t have all the stats from your inquiry but let’s create a scenario reflected in this question.

We buy a stock for $80.00 and sell the $80.00 call. Let’s say that represented a 2.5% initial time value 1-month return. Now the stock price moves to $83.00 and the $80.00 call also moves up in value ($3.00 in intrinsic value + a time value component).

We are now in a best-case scenario. We set up the trade where the max return is 2.5%. That now is the situation and we have $3.00 of downside protection for this profit. As expiration approaches, we can decide if rolling the option (if still in-the-money) makes sense.

Alan

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By: Harry https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199458 Thu, 07 Mar 2019 18:00:17 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199458 Alan,

If you are negative in your stock and positive in your short position would you roll up your stock position? In this case stock is negative $900 short call positive $700. Stock currently $83, bought this at $80. Market is negative. If I sold entire position I will be negative $200. Expiration March 15. Not sure if this is a negative situation.

Do you look at this long term position as a hedge to sell to open your short term call and in reality this is a profit only situation from my short position, otherwise I could not have a gain in my short term calls unless I had purchased the stock.

Harry

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By: Alan Ellman https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199422 Thu, 07 Mar 2019 10:50:06 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199422 In reply to Jim.

Jim,

I congratulate you for recognizing the importance of and incorporating exit strategies into our option selling strategies.

Your question relates to 2 different exit strategies:

1. Covered call writing positions

2. Pure stock ownership positions

For covered call writing positions, when option value meets our 20%/10% guidelines, we buy back the short call and follow-up according to the available choices (rolling down, “hitting a double” etc.). These can be reviewed in the exit strategy chapters of my books and DVDs. The stock repair strategy does not apply to covered call writing.

When we own shares, without the option component that have moved down in value, we can lower the breakeven with the stock repair strategy. Let’s say we own 100 shares of XYZ. This represents one long position. We then purchase 1 NTM call. This is the second long position. After establishing 2 long positions, we then sell 2 OTM calls which represent 2 short positions. These OTM calls will fund the 1 long call position.

Alan

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By: Jim https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199415 Thu, 07 Mar 2019 07:22:05 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199415 Alan,

Just a quick question.

Do I BTC all open Call contracts on the underlying before initiating the Repair strategy?

My Stock:

I purchased 100 shares of CELG at 91.25 and S-T-O the ITM Apr 18 90 Call for 5.25 (That was a 4% gain with a 1.3% downside protection on the Ellman Calculator)

Stock is now at 86.20 (90 call at $4.45 Ask)

So, I go ahead B-T-C the 90 Call and then begin strategy, is that right?

Jim

Thus, I am only working with the 100 shares of CELG on the Stock Repair Calculator

This seems proper but would feel better with a quick 10/4.

(The PDF prints says to put on 2 ATM or NTM long positions, but I think the long portion is only 1 contract and then sell 2 OTM)

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By: Alan Ellman https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199348 Wed, 06 Mar 2019 22:44:20 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199348 Premium members:

This week’s 8-page report of top-performing ETFs and analysis of ALL Select Sector Components has been uploaded to your premium site. The report also lists Top-performing ETFs with Weekly options as well as the implied volatility of all eligible candidates.

New members check out the video user guide located above the recent reports.

For your convenience, here is the link to login to the premium site:

http://www.thebluecollarinvestor.com/member/login.php

NOT A PREMIUM MEMBER? Check out this link:

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Alan and the BCI team

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By: Alan Ellman https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199151 Tue, 05 Mar 2019 12:29:11 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199151 In reply to Hoyt T.

Hoyt,

My team and I appreciate your support and valuable contributions to our BCI community.

Alan

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By: Marsha https://www.thebluecollarinvestor.com/vix-covered-call-writing-selling-options-against-market-volatility/#comment-199150 Tue, 05 Mar 2019 12:26:25 +0000 https://www.thebluecollarinvestor.com/?p=17594#comment-199150 In reply to Jay.

Thanks Alan and Jay…valuable information.

Marsha

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