The softcover version of my 9th book, “Covered Call Writing: A Streamlined Approach” is now available in the BCI store.

Use coupon code “ceo5” and enter “submit” or “apply” for a $5.00 discount:

https://thebluecollarinvestor.com/minimembership/covered-call-writing-a-streamlined-approach/

CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

Alan & the BCI team

]]>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:

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

]]>The new Blue Chip Report for the best-performing Dow stocks for the October 2023 contracts has been uploaded to your member site.

Look on the right side of the member page in the “resources/downloads” section and scroll down to “B”.

Alan & the BCI team

]]>Dan,

You made my day!

Your question demonstrates that you have an exceptional understanding of option calculations. I hope I had a little something to do with that.

Let’s first take the example I gave on page 270 of my book with PRGO:

You’ll note that an ITM call strike was originally sold. The way we calculate initial returns is to use the time-value component of the premium only in the numerator. For the denominator we use the stock price minus the intrinsic-value of the premium. Since we are not using the intrinsic-value as initial profit, we use it to “buy-down” the cost of the shares. Another (shorter) way to summarize the process for initial returns of ITM call strikes is: Time value/Call strike.

For ATM and OTM call strikes, the denominator is always the cost of the shares, as it was in the article.

Now, to finish up with the book formula: I took the final net credit and divided it by the original cost-basis, rather than the original cost of the shares.

In the recent article, we sold an OTM call strike, so the cost basis was the cost of the shares, both initially and after closing both legs of the trade.

I hope you’re hanging in there with me because I’m about to give a little history. Two years ago, when Barry and I were formulating the Trade Management Calculator (TMC), I revisited the cost-basis after closing both legs of an ITM covered call trade, as I created formulas in the management section of the spreadsheet.

I decided that using the entire cost of the shares for final calculations only, was slightly more accurate and so the denominator is slightly different between the example on page 270 of the Encyclopedia and that of the article.

The difference is minimal, but a difference, nonetheless, 3.02% compared to 3.09%.

I’m impressed, Dan.

Keep up the good work.

Alan

]]>Thank you for sending out your weekly emails with trading examples. I use your examples to check my own calculations.

In yesterday’s example (see subject above) it appears that the Combined Final Trade Total Profit/Loss (%) was calculated by: 100 X (Combined Final Trade Total Profit/Loss) / (Entry Stock Price X 300) => 100 X 507 / (55.91 X 300) = 3.02%.

However in your book Complete Encyclopedia for Covered Call Writing (Second Edition – 2019), page 270, the Mid-Contract Unwind Net Return On Position is calculated by: 100 X (Net gain/loss to unwind) / (Net cash to open position) => 100 X 507 / ((55.91 – 1.30) X 300) = 3.09%.

I realize the difference in calculation is small in most cases but I wonder if you have changed your preference for getting this answer?

Best regards,

Dan

]]>Bob,

Once we enter an option trade with an “eligible” security from one of our premium members watch lists, those trades are managed via our exit strategy arsenal as detailed in my books and videos, not by their removal from the lists.

The BCI screening process is incredibly rigorous, and some stocks or ETFs may be moved to the “failed current week” section due to the technical parameters. They may reappear later in the same monthly contract.

So, why create lists on a weekly basis? The answer is that many of our members use weekly options. That’s one reason. Another is that if we decide to sell an underlying, we use our most recent list to locate a replacement security.

Bottom line: Once we enter a trade with an eligible candidate and the security is subsequently moved to “failed current week”, we continue to manage with our exit strategy arsenal and re-evaluate when the next contract cycle begins. This may include selling the stock when such exit strategy guideline thresholds are reached.

Alan

]]>If one sold a CC on a stock that passed the previous week and the stock now appears on “failed current week” listing, what if any future action should be taken?

Not a candidate for future roll-out or roll-up? Do nothing?

How to interpret the change in listing please.

Thanks

Bob

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