Hi Alan,

This week I was in a CSP set up with TER. I opened it up on Tuesday for the Friday ahead with a 0.25 Delta. Due to some volatility the strike price went down to the 3% rule, so I closed it up with a loss. After that it recovered.

TER is on our list again and I do not have any chips in my portfolio anymore ,so I am looking to open a CSP on it again.

This time I consider going down (a lot) and let it run for about one month (I guess the weeklies are just too volatile for me and a bit hard to manage….)

If you are going into a CSP trade, what is the general Delta you start with? I am considering to lower it down to about 0.15 or 0.20 and let the trade run for about a month…

What are your thoughts on this?

Greetings from sunny Netherlands.

Bas

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Covered call writing is a low-risk option-selling strategy that can be structured in a myriad of different applications. Personal risk-tolerance, income goals, cash available and trading style all play roles in how we craft our trades. In this article, 4 covered call strategies will be defined and calculated to demonstrate the flexibility investors enjoy as it relates to covered calls:

• Traditional covered call writing
• The Collar strategy
• Portfolio overwriting
• The Poor Man’s Covered Call (PMCC)

All trades use NVDIA Corp. (Nasdaq: NVDA) as the underlying stock.

Traditional Covered Call Writing

The goal is to generate cashflow with elite-performing stocks or ETFs that need not be retained if exercise occurs. The initial 33-day return, and upside potential are shown, using the BCI Trade Management Calculator (TMC) in the green ovals:

Portfolio Overwriting

The goal is to generate modest cash flow while share retention is critical. Annualized return goals can range from 4% to 15%. This is supplemental to the share appreciation and dividend income (when applicable) we are already enjoying. Initial return and upside potential are shown, using the TMC, in the green ovals:

The Collar Strategy

The goal is to generate cash flow and buy a protective put to prevent catastrophic losses from declining share prices. Returns are lower due to the put price debit. Initial results and combined calculations with upside potential are shown in the red ovals using the BCI Collar Calculator:

***The BCI Trade Management Calculator can also be used for these calculations.

Poor Man’s Covered Call PMCC)

Instead of purchasing shares of stock, long-term options called LEAPS are purchased instead and short-term covered calls are written against this long position. It costs less to enter a PMCC trade. Initial returns are generally higher than traditional covered call writing because of the lower cost to enter, but all pros & cons must be mastered before deciding to implement this and the other strategies. Initial return and upside are shown in the purple oval using the BCI PMCC Calculator:

Discussion

Covered call writing is a multifunctional strategy that can be deployed in a myriad of ways. Strategy goals, personal risk tolerance, trading style and cash available are factors that will dictate which approach is best for each investor.

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Your generous testimonials

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 publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

1. American Association of Individual Investors: National paid event

Comprehensive 4-part live paid, online workshop event featuring covered call writing, cash-secured puts and advanced strategies.

Mastering Options for Income

A Comprehensive Workshop Series on Covered Calls, Cash-Secured Puts & Advanced Strategies

• 10/13 at 2 PM ET
• 10/20 at 2 PM ET
• 10/29 at 2 PM ET
• 11/10 at 2 PM ET

Details to follow.

2. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027- All-day event

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details and registration link to follow.

3. Long Island Stock Traders Investment Group

Thursday February 18, 2026, at 7:30 PM ET

Registration link and details to follow.

4. Las Vegas Money Show

February 22 – 24, 2027

Paris Hotel

The covered call writing options we sell are American style options. This means they can be exercised at any time by the option holder up to 4 PM ET on expiration Friday. So, why aren’t ITM covered calls exercised early when an out-of-the-money (OTM) strike moves in-the-money (ITM) as a result of share price acceleration? This is a common question I get from new BCI students and a question I pondered myself 30 years ago when I started with options. This article was motivated by an email Steve sent to me on 6/4/2026 regarding a trade he executed with Agnico Eagle Mines Ltd. (NYSE: AEM). Why hasn’t this (now) ITM call option been exercised?

Steve’s AEM trade as of market close on 6/4/2026

• 6/4/2026: AEM trading at $176.86
• 6/4/2026: The $170 strike was in place and not exercised. Why?
• Let’s analyze the AEM option chain to get one of the answers

AEM option chain on 6/4/2026

• The $170 call shows a bid-ask spread of $5.80 – $8.30
• Let’s say it can be sold at the midpoint of $7.05
• Exercising results in an unrealized (until shares are sold) gain of $6.68 ($176.68 – $170)
• However, the option can be sold for a credit of $7.05
• Exercise results in capturing intrinsic-value only
• Selling the option results in capturing both intrinsic-value + time (extrinsic)-value

Here’s an analogy:

If a store gives you a coupon allowing you to buy a $52 item for $50, the coupon already has $2 of immediate value. That $2 is the intrinsic value. If someone pays you $2.50 for that coupon, the extra $0.50 represents the time and opportunity remaining before the coupon expires.

Additional reasons early exercise is so rare

• Call buyer can keep cash in an interest-bearing account until the last minute prior to contract expiration
• Call buyer exposed to greater capital risk because stock price > option price
• Call buyers want to be call sellers, not share owners

Early exercise exception

The main reason for early exercise of an ITM call option relates to ex-dividend dates. These are the dates shares must be owned in order to be eligible to capture a future dividend. If share retention is essential to the strategy, ex-dividend dates must be avoided.

Discussion

Early exercise of ITM covered calls is extremely rare. When it occurs, it is typically associated with ex-dividend dates and usually associated with investor error.

THE POOR MAN’S COVERED CALL

Online Streaming video course with Downloadable Workbook

The PMCC strategy replaces the long stock positions with long call positions, typically deep in-the-money long-term expiration options known as LEAPS. Because long options cost less than stocks, we are investing less money and the return on our capital increases. As with all strategies, there are pros and cons that must be mastered to determine if this is a proper strategy for our personal risk-tolerance and return goals. This program will highlight in great detail.

Learn more here + a video.

-Want free access to BCI’s discount/coupon codes for Alan’s weekly Featured Product choice? Click here and subscribe free to The Market Tone Weekly.

Your generous testimonials

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 publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

1. American Association of Individual Investors: National paid event

Comprehensive 4-part live paid, online workshop event featuring covered call writing, cash-secured puts and advanced strategies.

Mastering Options for Income

A Comprehensive Workshop Series on Covered Calls, Cash-Secured Puts & Advanced Strategies

• 10/13 at 2 PM ET
• 10/20 at 2 PM ET
• 10/29 at 2 PM ET
• 11/10 at 2 PM ET

Ongoing AAII event.

2. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027- All-day event

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details and registration link to follow.

3. Long Island Stock Traders Investment Group

Thursday February 18, 2026, at 7:30 PM ET

Registration link and details to follow.

4. Las Vegas Money Show

February 22 – 24, 2027

Paris Hotel

Rolling-in is an option term introduced by The Blue Collar Investor. It involves closing a covered call trade and rolling it to a same strike, earlier-dated contract expiration. The reasons why we may choose to take this action are discussed and a real-life example with ETSY is analyzed, with trade calculations detailed, using the BCI Trade Management Calculator (TMC).

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Rolling-up covered call trades on expiration Friday using the same expiration date is rarely used in the BCI methodology. However, there are rare occasions when this strategy may be successful. On 6/1/2026, Andrew shared with me a series of trades he executed with Palo Alto Networks, Inc. (Nasdaq: PANW). His goal was to generate additional income while also retaining the current ITM status so that exercise would occur. He did not want to incur weekend risk. In this article, Andrew’s trades will be analyzed, and a blueprint will be developed to determine how and when to execute this exit strategy.

Andrew’s PANW trades

• 5/26/2026: Buy 100 x PANW at $257.58
• 5/26/2026: STO 1 x 5/29/2026 $250 ITM call at $10.80
• 5/29/2026 (11 AM ET): PANW trading at $272.18
• 5/29/2026: BTC 1 x 5/29/2026 $250 call at $22.71
• 5/29/2026: STO 1 5/29/2026 $270 call at $3.44 (rolling-up)

***Note: At the time of the roll-up, the delta of the $270 strike was slightly above 50%, meaning a 50-50 probability of expiring ITM, which is what Andrew preferred. Factoring into the equation is the robust implied volatility of PANW which can move the stock significantly in either direction.

Initial trade calculations prior to rolling-up using the BCI Trade Management Calculator (TMC)

• Red circle: This is a 4-day trade
• Yellow cell: Breakeven price is $246.78
• Brown cells; Initial returns are 1.29%, 117.53% annualized
• Purple cell: 2.94% protection to the downside which ensures a 1.29% 4-day return, if share price moves down less than that amount
• Pink cell: Time-value premium collected is $322 per contract

Post rolling-up calculations using the BCI Trade Management Calculator (TMC): PANW closed the day at $281.69

• Red ovals: The strategy is rolling-up, not rolling out-and-up. The TMC will work for both
• Green cells: The final post-rolling calculations show a realized $ profit of $395 (1.53%), up from the $322 (1.29%) prior to rolling-up
• The risk of using this exit strategy was share price declining below the $270 strike, reducing profits and increasing the likelihood of no exercise

Factors making rolling-up on expiration Friday a challenging management tool

• Fighting bid-ask spreads
• Time-value erosion (theta): Starts slowly and the “falls off a cliff” as expiration approaches
• Profit-taking can occur after an exponential price increase causing share value to decli9ne below the new strike

Blueprint (guidelines) for rolling-up on expiration Friday and retaining the ITM strike status

• This strategy may be successful with high-implied volatility securities like PANW
• Check the delta of the higher strike which will determine the approximate probability of the stock price remaining ITM. Are you willing to incur this degree of risk?
• If yes, use the BCI Trade Management Calculator (TMC) to run the calculations. As a guideline for weekly expirations, we would want at least an additional 1/4% to justify the delta risk

Discussion

Rolling-up covered calls using the same expiration date is rarely used in the BCI methodology. It may be appropriate with high-implied volatility securities where the acceptable delta-risk generates at least an additional 1/4% for weekly expirations. Let’s not lean too heavily on this particular exit strategy.

Covered Call Writing Online Video Course with Workbook

You Will Learn:

– How to locate the greatest performing stocks for option-selling
– Which Is the best option to sell
– How To calculate your returns
– How To utilize exit strategies – Decrease losses & enhance gains

Click here for video & more.

-Want free access to BCI’s discount/coupon codes for Alan’s weekly Featured Product choice? Click here and subscribe free to The Market Tone Weekly.

Your generous testimonials

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 publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

1. American Association of Individual Investors: National paid event

Comprehensive 4-part live paid, online workshop event featuring covered call writing, cash-secured puts and advanced strategies.

Mastering Options for Income

A Comprehensive Workshop Series on Covered Calls, Cash-Secured Puts & Advanced Strategies

• 10/13 at 2 PM ET
• 10/20 at 2 PM ET
• 10/29 at 2 PM ET
• 11/10 at 2 PM ET

Details to follow.

2. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027- All-day event

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details and registration link to follow.

3. Long Island Stock Traders Investment Group

Thursday February 18, 2026, at 7:30 PM ET

Registration link and details to follow.

4. Las Vegas Money Show

February 22 – 24, 2027

Paris Hotel

Hi Alan,

I read an article about option traders taking advantage of high volatility stocks looking for high premiums for time decay. An example was stock “NTES” selling the 1/15/27 call with a strike of $40.00 and a premium of $75.00/share. The article said that the traders must know something big was going to happen. I looked at the option listed and it only had an open interest of 2. I wondered if entering that trade was safe, if in the nine months until exercise there would be additional open interest to buy to close. Your opinion?

Thank you,
Alan

Free Resources:
https://thebluecollarinvestor.com/minimembership/bci-free-resources/

Premium Membership:
⁠https://thebluecollarinvestor.com/membership

Best Discounted Packages:
https://www.thebluecollarinvestor.com/store/

More Videos:

• For those new to Alan’s system of Covered Call Writing, be sure to take the Free Beginners Corner Series
• Free Training Videos Archive
• Ask Alan Video Q & A Archive
• Subscribe to our YouTube Channel

To enter your questions to “Ask Alan”, fill out the form on the contact page. Be sure to begin your message with “ASK ALAN”

When a cash-secured put is sold, the goal is to avoid share price moving below the breakeven price (strike – put premium). One of the definitions of delta is approximate probability of the underlying security’s price moving below the OTM put strike and, therefore, subject to exercise. Delta measures this risk. What is a reasonable delta to target? In this article, a real-life example with Teradyne Inc. (Nasdaq: TER) will be analyzed to present a blueprint to address this dilemma.

TER put option chain on the Sunday before market opening on 5/26/2026 (using “last” prices transacted)

TER trading at $355.56

• Deltas are highlighted in the yellow cells
• Last transacted prices are highlighted in the brown cells
• Strikes under consideration are highlighted in pink
• With TER trading at $355.56, all strikes are deep OTM (much lower than current market value)
• Note the robust implied volatility (IV = 74% – 78%) of these strikes which allow for significant returns while still structuring our trades defensively

Initial low-delta strike put calculations using the BCI Trade Management Calculator (TMC)

• Brown cells: 24-day & annualized initial returns
• Yellow cells: Breakeven prices (all well below current market value of $355.56)
• Brown cells: Initial 24-day & annualized returns
• Pink cells: Cash generated into broker account per-contract
• Purple cells: % discount, if options are exercised and shares put to us at the breakeven prices

Which delta/ which strike do we select?

Before entering any trade, we must identify our goals. What are we looking to accomplish? For me, it’s an initial time-value return goal range between 2% – 4%/month. When looking to be defensive, it’s closer to 2%/month. This would lead me to the $280.00 and $290.00 put strikes. For those more aggressive, higher strikes may be appropriate. For traders who are more defensive, lower strikes will still return meaningful initial profits.

Discussion

Strike selection is based on the pre-stated initial time-value return goal range we are seeking, our personal risk tolerance and overall market assessment. One size does not fit all. In this article, low delta put strikes were analyzed showing initial returns and risk of exercise.

VIDEO: SELLING CASH-SECURED PUTS BASIC & ADVANCED PRINCIPLES

This course contains 6- parts in the video course:

Section I: Option basics (definitions and foundational information)
Section II: Traditional put-selling (stock & option selection + position management)
Section III: PCP (wheel) strategy (adding covered calls to selling cash-secured puts)
Section IV: Buy a stock at a discount instead of a limit order (buy a stock at our target price or get paid not to buy the stock)
Section V: Ultra-low-risk put/Delta strategy (High probability, low-risk trades)
Section VI: Ultra-low-risk put/implied volatility strategy (High probability, low-risk trades)

Learn more here.

-Want free access to BCI’s discount/coupon codes for Alan’s weekly Featured Product choice? Click here and subscribe free to The Market Tone Weekly.

Your generous testimonials

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 publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

1. American Association of Individual Investors: National paid event

Comprehensive 4-part live paid, online workshop event featuring covered call writing, cash-secured puts and advanced strategies.

Mastering Options for Income

A Comprehensive Workshop Series on Covered Calls, Cash-Secured Puts & Advanced Strategies

• 10/13 at 2 PM ET
• 10/20 at 2 PM ET
• 10/29 at 2 PM ET
• 11/10 at 2 PM ET

Details to follow.

2. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027- All-day event

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details and registration link to follow.

3. Long Island Stock Traders Investment Group

Thursday February 18, 2026, at 7:30 PM ET

Registration link and details to follow.

4. Las Vegas Money Show

February 22 – 24, 2027

Paris Hotel