Options – Help with Covered Calls


It is important to note that the TJS staff does not actively trade Options. So, we have asked for help from the TJS user community (ones who are avid Options traders) and they have kindly provided the excerpts below. We hope you find them helpful, and if you would like to add your own write-up or add to an existing one, please send us a
message.


 

Covered Calls – with fellow TJS user:

Avid Options trader, Bonnie Hayworth says…

“Some traders wish to see their total P&L combined on one Trading Log row (Method 1), which is not possible with (Method 2) and that is a good thing. I like to break it out using Method #2 to see how well selling premium is working against each product and more importantly, when selling premium makes sense! Here’s why; say you own SLV and APPL, and SLV moves sideways a lot of the time. Silver and gold run cyclically in the Market place, and they typically move higher in the latter part of summer. With that said, I am able to track on the the TJS that selling calls on SLV in the month of August and September is a bad idea… that my probabilities are very low in those months.”

Input:

I input this as two transactions (separate rows in the Options Trading Log) because that’s how it played out. This will show in the P&L (if /when) the stock is sold. It’s the opposite in the sold call depending on if the stock is already owned, which will dictate the way the transaction is inputted.

If you have the TJS Stock/Options product, then you may wish to enter your Options – Covered Call “Stock” transactions in the Stock Trading Log – this will be a personal preference.

If you have the TJS Options product (only), you’ll enter your Covered Call “Stock” transactions in the Options Trading Log. To get the proper P&L for your Stock trades, follow the instructions in cell N11 where it says “Adjusted Size” — this will change the Contract Size back to Share size.