Calculating Mid-Contract Covered Call Writing Trade Status: A Real-Life Example with Bristol-Myers Squibb Comp. (NYSE: BMY)

After entering our covered call writing and put-selling trades, we can calculate the current status of our trades mid-contract with a few simple entries into our Trade Management Calculator. In this article, a real-life covered call writing example with BMY will be highlighted. Hypothetical examples of closing winning and losing trades mid-contract will be detailed utilizing the spreadsheet.

BMY initial trade details

• 7/5/2022: Buy 100 x BMY at $76.84
• 7/5/2022: STO 1 x 7/22/2022 $78.00 call at $0.98
• 7/12/2022: BMY trading at $80.00; $78.00 call option has an ask price of $2.40 (winning trade)
• 7/12/2022: BMY trading at $74.00; $78.00 call has an ask price of $0.25 (losing trade)

Option-chain for BMY on 7/5/2022

Initial trade entries and calculations

BMY: Initial Trade Entries and Calculations

• Initial time-value return is 1.28%
• Annualized initial return is 25.86% based on an 18-day trade
• Additional upside potential of 1.51% if BMY moves up to or beyond the $78.00 strike

Mid-contract status of winning and losing positions

BMY: Mid-Contract Calculations

When BMY moves to $80.00 (top rows)

• Net option loss of 1.85%
• Net stock gain of 4.11%
• Total $ gain of $174.00 per-contract
• Total % gain of 2.26% from 7/5/2022 to 7/12/2022

When BMY moves to $74.00 (bottom rows)

• Net option gain of 0.95%
• Net stock loss of 3.70%
• Total $ loss of $211.00
• Total % loss of 2.75% from 7/5/2022 to 7/12/2022

Important to note

• Be sure the mid-contract status calculations are deleted and final closing entries made to assess actual final contract calculations
• Mid-contract status calculations can be computed multiple times during the contract with no limitations
• The mid-contract share price can also be entered into the “Final Unsold Stock Price [$/Sh]” column. The calculations will be the same

Discussion

The current status of our option-selling trades can easily be determined with a few simple entries into the BCI Trade Management Calculator. Based on these calculations, we can make decisions regarding the need for trade management implementation.

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Long Island Stock Traders Meetup Group (Private webinar)

Analyzing a 1-Month Covered call Writing Portfolio from Start to Finish

Thursday February 16,2023

7:30 PM ET- 9 PM ET

A real-life example with a $100k ETF Select Sector SPDR portfolio
Covered call writing is a low-risk option-selling strategy that generates weekly or
monthly cash flow. This presentation will demonstrate how to implement this
strategy using a database of only 11 exchange-traded funds for a 1-month option
contract cycle. These are real-life trades taken directly from one of Dr. Ellman’s
portfolios with screenshots verifying each trade. A final monthly contract result
compared to the performance of the S&P 500 will be calculated.

Topics included in this webinar:

 What are the Select Sector SPDRs?
 How to establish a covered call writing portfolio
 What is the role of diversification?
 What is the role of cash allocation?
 Calculating initial returns
 Analyzing each trade in the monthly contract
 Final results
 Next steps

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