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Pros and Cons of Covered Call Writing: Calculation Perspective
Every investment strategy, including covered call writing and selling cash-secured puts, has advantages and disadvantages. When we decide to implement a plan, it is with the understanding that we...
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Rolling Out-And-Up in Our Buy-And-Hold Portfolios
Portfolio overwriting is a covered call writing-like strategy where we sell call options against long-term buy-and-hold securities. Generally, these are low-cost basis stocks that are dividend-bearing...
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Mitigating Losses After a Disappointing Earnings Pre-Announcement
A critical BCI rule for covered call writing is never to sell an option if there is an upcoming earnings report prior to contract expiration. Earnings reports are risky events we want to avoid. From...
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Beware of High Premium Returns
Covered call writers and put-sellers must set goals regarding targeted premium returns before entering trades. These objectives are based on personal risk tolerance, market assessment and chart...
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Rolling Option Considerations: A Real-Life Example with BEAT
Exit Strategies for covered call writing is the third required skill for successful implementation of this strategy (stock selection and option selection are the first two). This is also known as...
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Seeking the Highest Option Premiums is a Losing Strategy
One of the common mistakes made by covered call writers and put-sellers is to make investment decisions based primarily on the highest premium returns. Certainly, we all want to generate the highest...
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Should We Close Our Deep-In-The-Money Strike or Allow Assignment?
When our covered call positions end up moving deep in-the-money, we are faced with the decision to close as our maximum profit has been realized or take no action and allow assignment. In October 2017,...
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What Criteria Should We Use to Close our Covered Call Positions Early?
When we sell out-of-the-money call options, we are initiating bullish covered call writing positions. Our goals are to generate option premium as well as share appreciation from current market value up...
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In-The-Money Call Strikes: Intrinsic Value Protects Time Value
Strike price selection is one of the 3 required skills for covered call writing and put-selling. When we sell in-the-money call options we are protecting our positions to the downside while still...
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Rolling Out-And-Up: Explaining the “Bought-Up” Value of our Stocks
One of our covered call writing exit strategies is rolling out-and-up. This involves buying back (buy-to-close) the current in-the-money option and selling the later-date higher strike price. For...
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Generating 2% – 4% in Bull Markets: How to Take Advantage of Out-Of-The-Money...
The 3 required skills for covered call writing and selling cash-secured puts are stock selection, option selection and position management. This article will use real-life examples highlighting the...
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Evaluating a Portfolio from a Numerical Perspective/ New Book and Calculator...
When we formulate our covered call writing and put-selling portfolios, we are basing our decisions on non-emotional sound fundamental, technical and common sense principles. Similarly, we can analyze a...
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Evaluating the Success of our Covered Call Trades
Whenever a covered call trade results in a maximum return, it is a successful trade…period…end of story. To most, this statement appears nonsensical and self-evident. But I’m here to tell you that...
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Factors to Consider When Closing a Trade Early: A Real-Life Example with ATVI
Exit strategies for covered call writing includes closing a trade when share price rises above the original strike price sold. When formulating these decisions, we must factor in the cost-to-close as...
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Rolling Out-And-Up And Then Stock Price Declines
Rolling our covered call trades involves multiple months of trading statistics. The calculations may be deceiving initially but on deeper analysis, rolling our options can represent an invaluable...
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Buying Low and Selling High Also Applies to Option-Selling
Covered call writers hold two positions. We are long (own) the stock and short (sold) the call option. It is intuitive to investors that it is to our advantage if the stock price accelerates or at...
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Establishing Our Option-Selling Goals: Total Portfolio Versus Individual...
When selling covered call and put options we must first establish our initial time value return goals. We also should factor in upside potential when writing out-of-the-money call options and downside...
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Understanding the “Paid-Up” Risk When Rolling Out-And-Up: A Real-Life Example...
One of our covered call writing exit strategies when the strike is in-the-money on expiration Friday is rolling out-and-up. This is when we buy back the near-month call (buy-to-close) and sell the next...
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“Hitting a Double” Calculations with The Ellman Calculator
One of the BCI exit strategies that helps distinguish us from all other covered call writers is known as “hitting a double” We use this position management technique when share value declines such that...
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Trade Management: A Real-Life Example with Brooks Automation, Inc. (NASDAQ:...
Once we enter our covered call writing trades, we immediately go into position management mode. In August, 2018, Mike generously shared with me a series of trades he executed using Brooks Automation,...
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