Calculating Mid-Contract Put-Selling Trade Status + A New Covered Call Writing Strategy Coming Soon

After entering our 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 cash-secured put example with Bristol-Myers Squibb Comp. (NYSE: BMY) will be highlighted. Hypothetical examples of winning and losing trades will be detailed on the spreadsheet. Click here to read related article I published last week for covered call writing.

BMY initial trade details

• 7/5/2022: BMY trading at $76.84
• 7/5/2022: STO 1 x 7/22/2022 $75.00 OTM put at $0.78
• 7/12/2022: BMY trading at $80.00; $75.00 put option has an ask price of $0.20 (winning trade)
• 7/12/2022: BMY trading at $72.00; $75.00 call has an ask price of $3.20 (losing trade)

Initial trade entries and calculations

• Initial time-value return is 1.05%
• Annualized initial return is 21.31% based on an 18-day trade
• If exercised, BMY will be purchased at a 3.41% discount from the price when the put trade was initiated

Mid-contract status of winning and losing positions

BMY: Mid-Contract Status of Put Trades

When BMY moves to $80.00 (top rows)

• Net option gain of 0.78%
• Net cash profit of $58.00 per-contract
• Total % gain of 0.78% from 7/5/2022 to 7/12/2022

When BMY moves to $72.00 (bottom rows)

• Net option loss of 3.26%
• Total $ loss of $242.00
• Total % loss of 3.26% 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

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.

Coming Soon: A new streamlined version of covered call writing

For the past 3 years, I have been investigating ways to consolidate our rules and guidelines for covered call writing into a more user-friendly and time-efficient strategy. I have tested my ideas using real-life trading in my personal portfolios. This past year everything clicked, and I will be sharing this information with you in the 1st quarter 2023… a new game plan which will be especially appealing to those with busy schedules.

This unique blueprint for covered call writing will include a new book detailing every trade I made using this strategy with screenshots from my brokerage account. In addition, it will encompass 2 new spreadsheets dedicated to the new system.

I will share this information, first, with our premium members in the form of a live webinar. At a later date, it will be released to the entire BCI community. Stay tuned.

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Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to share some of these testimonials in our blog articles. We will never use a last name unless given permission:

Upcoming events

To request a private webinar for your investment club, hosted by Alan & Barry: [email protected]

1.Wealth365 Investors Summit

Week of January 16th – 21st

Topic, time, date and registration link to follow.

2.Long Island Stock Traders Meetup Group 

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

Go to www.meetup.com/listmg

Click on join to become a member (Free membership)

Then click on RSVP (meeting is free) to obtain the ZOOM link.

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Market tone data is now located on page 1 of our premium member stock reports and page 1 of our mid-week ETF reports.

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