Ask Alan #101 – Managing a Risky Trade
Alan answers a question shared by Ty, who asks: “I flat out gamble on one trade in my portfolio, and this is my gamble stock: (1) On 6/30/14 I bought GWPH at $103.90 and sold the 8/16 $105 call @...
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Calculating Future Returns Using Delta
Understanding option calculations is an integral part of the BCI methodology. Using the Ellman Calculators (Basic and Elite versions) will facilitate the process but knowing the “how” and “why” of...
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Using Beta To Capture Higher Premium Returns
When using covered call writing and put-selling strategies it is important to set goals for initial returns in order to select the most appropriate underlying security and option. My goal for initial...
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Capital Gains (Losses) For Covered Call Writing In Non-Sheltered Accounts
Whether we sell covered calls or cash-secured puts strong consideration should be given to trading in sheltered accounts whenever possible. Most, if not all, of our trades will be short-term in nature...
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Rolling Out Decisions: Evaluating a Real Life Trade
Rolling options is an important exit strategy choice when selling covered call and put options. Options can be rolled up and down in the same contract month or a future contract month. For the most...
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Using Volatility to Predict Future Stock Prices
Volatility is a key consideration for both stock selection and option-selling decisions. Despite its relevance to our covered call writing and put-selling selections, volatility does have its...
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LEAPS and Covered Call Writing: A Review and a Hypothetical Example/ Contest...
A covered call writing-like strategy involves buying deep in-the-money LEAPS options and then selling short-term slightly out-of-the-money call options. Leaps become a stock surrogate. The term Leaps...
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A Review of Volatility and its Impact on Option-Selling
When we write covered calls or cash-secured puts, we are selling volatility. The time value component of a short-term option premium reflects the amount of time until expiration plus the volatility of...
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Ask Alan 116 “Is Covered Call Writing a Zero Sum Game?”
Alan answers a question posed by Todd, who asks: “Is it true that options is a zero sum game? If so, if covered call writers are more likely to make money in the long run, who are buying these options...
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Mechanics of LEAPS
LEAPS are long-term options that have expiration dates between nine months and two and a half years out. The term is an acronym for Long Term Equity AnticiPation Securities. Once the expiration date is...
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Rolling Down with CALM: Turning Losses into Gains
Exit strategies for both covered call writing and selling cash-secured puts is one of the three required skills for maximizing investment returns. Whether we are mitigating losses, turning losses into...
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Moneyness of Options: Why Call and Put Premiums for the Same Stock, Strike...
Option trading basics teaches us that the concept of put-call parity means that for every call option price, the corresponding put option (same stock, strike and expiration) will have an implied value....
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Can We Use Deep-In-The-Money Puts to Buy a Stock at a Discount?
One of the practical applications of selling cash-secured puts is to buy shares “at a discount” In my books and DVDs I use out-of-the-money puts in lieu of setting limit orders in order to accomplish...
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Covered Call Writing and Inverse ETFs: Generating Cash in Extreme Bear Markets
Inverse Exchange-Traded Funds (ETFs) use derivatives to bet against the direction of financial markets. These are known as short or bear ETFs and will make money if markets decline in value. They will...
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Gold ETFs and Implied Volatility in Bear Markets
Lately, I’ve been writing about selling options in bear markets. No surprise here as the market is down about 10% in the past three months. This, of course, is challenging for all investors but...
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Rolling Up in the Same Contract Month: Comparing Before and After Scenarios
Rolling up is a useful exit strategy for both covered call writing and put-selling. However, in my humble opinion, it rarely benefits us to roll up in the same contract month. The main reason for this...
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Comparing Similar Covered Call Writing and Put-Selling Positions
Covered call writing and selling cash-secured puts are similar strategies that do have certain differences. In my book, Selling Cash-Secured Puts, Figure 68 on page 214 highlights the similarities and...
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Defensive Call and Put Positions in Bear and Volatile Markets
Strike price selection can be tailored to our covered call writing and put-selling trades based on overall market assessment. In bear and volatile market conditions we favor in-the-money calls and...
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Jim Cramer’s Stocks and Covered Call Writing
Locating stocks for covered call writing and put-selling is the first step as we prepare to execute these income-generating strategies. In the BCI methodology we use a three-pronged approach to...
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Exchange-Traded Fund Option-Selling in Bear Markets
Covered call writing and put-selling can be used in most market conditions including bear markets. In my books and DVDs, I detail the use of in-the-money call options (strikes lower than current market...
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