Roll, close or wait? Ring the register more than once on stocks and ETFs with puts, calls, dividends and capital gains.
Cash secured puts and covered calls offer you many ways to manage the outcomes of your trades as the contract approaches expiration. Learn to use this flexibility to your advantage.
What you’ll learn
- Use puts, calls, dividends and capital gains to generate income and boost your returns..
- Decide whether to do nothing, roll, or close an option contract..
- Calculate annualized returns on options trades..
- Create a personalized spreadsheet for ongoing trading records..
- Find your breakeven point and determine profits and loss on a long-term campaign..
- Analyze and plan for potential outcomes of an option trade..
- Learn to roll straight out, roll down, roll up, or expand a trade..
Course Content
- Introduction to Trade Management; Thinking Long Term –> 4 lectures • 11min.
- Choices for Trade Management –> 4 lectures • 15min.
- Decision Points –> 7 lectures • 28min.
- Calculating Annualized Returns; A Deeper Look –> 5 lectures • 8min.
- A Walk Through the Spreadsheet –> 5 lectures • 13min.
- Final Notes –> 2 lectures • 5min.
Requirements
Cash secured puts and covered calls offer you many ways to manage the outcomes of your trades as the contract approaches expiration. Learn to use this flexibility to your advantage.
Patricia Saylor, founder of Saylor Financial Fundamentals, has taught hundreds of novice investors and option traders from all over the world through 1:1 coaching sessions, Udemy classes, and her book, The Novice Investor’s Guide to Stocks, Funds, and Options. She is a lifetime educator who understands how to break down complex concepts into bite-sized pieces, sequence information, and provide clear examples.
When you sell an option contract, as it approaches expiration, it may be in the money or out of the money. Either way, and depending on your goals for the trade, there are several paths forward. With the information in this course, find the path that moves you closer to your target.
Learn to decide whether doing something or doing nothing is the best course of action. You may wait for the contract to expire and let the passage of time work for you or roll a position out to a later date for more income. Sometimes you can even buy to close a contract early to free up capital and lock in the majority of your gains in a short amount of time.
This useful course is designed to be a follow-up to two Novice Options Traders courses, How to Sell Cash Secured Puts; Safe Options Trading and How to Sell Covered Calls; Safe Options Trading Strategies. But if you already confidently use those two strategies, go ahead and dive in here!
- Learn the formula to calculate projected annualized returns on contracts you are considering selling, rolling or closing early.
- Make an apples to apples comparison of your choices when selecting strike prices and expiration dates.
- Understand the relationship between share prices, and extrinsic and intrinsic value to help you plan your trade adjustments.
- Know your breakeven point.
- Incorporate dividend information as you select expiration dates or decide whether to allow a contract to be assigned.
- Develop a useful spreadsheet to keep track of your long-term campaigns and support your decision-making.
Review questions and homework exercises help you put your new knowledge into practice.
Final Project
By the end of this 90-minute course, you’ll be ready to set up your own custom spreadsheet and analyze this hypothetical trade!
Trade Setup Description:
- You own 225 shares of hypothetical stock ABC.
- You paid $70/share for it.
- The current share price is $75.
Last month, the share price was $77.
- You sold to open a covered call with a strike price of $77.50 and received $92.
- You sold to open a cash secured put with a strike price of $76 and received $84.
- Both positions expire 30 days from the date you sold them.
Assignment and Questions
- First, enter the trade details on your spreadsheet to help with your analysis.
- How much have you gained on the share price for your 225 shares?
- Taking into consideration the premium you received for the two option contracts, what is your total investment in the position?
- What is your average investment per share?
- What is the annualized return on each option position you sold?
- If the share price remains steady at $75, what will happen to the put in your account at expiration?
- What will happen to the covered call?
- Describe the outcome if you choose the “do nothing” path.
- What are your other choices for managing the two option contracts?
- Explain what you think the best course of action would be and why.
Try your hand at this analysis, and find the answers at the end of the course.