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Commodity Report #29 – Selling Calls on Commodity ETF’s

November 30, 2015

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In episode #29 of the Commodity Report, Coach T walks the team through how, when and where to sell a call option on an ETF if you get assigned. Check out in the video below.



Notes from the video

  1. Always watch the video and take notes. Post your questions in the Clubhouse.
  2. If you are assigned from a Naked Put trade you can turn that stock position into a Covered Call for cashflow.
  3. Selling calls at 30 days and OTM (near .40 delta) will keep you at near Maximum Cash Flow potential.
  4. 1 Contract sold will convert to 100 shares assigned. Make sure when you trade naked puts you can afford the stock assignment.
  5. Traders have a different mind-set than Investors. Identify the type of position you’re building and set your rules accordingly.
  6. Use the TTOS spreadsheet to keep you organized when building cashflow spreads.
  7. Using the Extrinsic Value column is a very helpful calculation for a cashflow trader – especially when rolling call options.
  8. When rolling options, you can buy the call back and sell the new call in separate orders or do them concurrently through a rolling order.
  9. Calculating Extrinsic Value as a % of Stock Price gives you important information regarding remaining cashflow.
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20 Replies to “Commodity Report #29 – Selling Calls on Commodity ETF’s”

  1. RobertWhitaker says:

    Thanks for the great information Coach!

  2. Bill Trimborn says:

    Another great Commodity Corner, Tim! I’m making adjustments to my covered call system tonight thanks to your simple, straightforward teaching!

  3. You guys are very welcome! I love doing these reports.

  4. Adam Barr says:

    Great report Tim.
    I have a question on USO I have some shares that I got put at $15.00 and I have been selling calls on it for a couple months now. Haven’t been called out yet. Looking at rolling into the DEC5 13.50 calls. What happens if the stock moves up past 13.50. should I roll at a loss or get called out and rebuy it to keep selling calls. As of now if I get called out it would be a small loss.

    I hope I explained that so it makes sense.

    Thanks

  5. MatthewMcQueary says:

    Another great video Tim. The extrinsic value rule for rolling makes this fairly simple strategy even simpler. Thanks again

  6. Wow, what a great report! Loving this new approach.

  7. PaulButtars says:

    Hi Tim this is very useful, just one question when your covered call is in the money, your saying only roll it if the extrinsic value is 1% of the stock price, no matter what the option price is?

  8. That’s right Paul.

  9. JoanNee says:

    Love it Tim, thanks! Does one bend the rule of going out 30 – 60 days when rolling a call if the next strike out is longer than 60 days? For example, my Jan USO call is less that 1% of stock price and I’d have to roll out to April now (no weeklys listed yet). Go for it?

  10. In that case Joan, you would probably roll down to pick up more extrinsic value and stay in January.

  11. Kody Potter says:

    I have the same question as Adam Barr did above. Is the solution or fix that you should have rolled earlier before it went deeper in the money?
    Thanks Tim!

  12. If it moves in the money, and the extrinsic value is drained, you should roll it at a loss if you don’t want called out. This is to maximize theta and cash flow.

  13. Kody Potter says:

    Thanks Tim, for the help and explanation.

  14. Adam Barr says:

    Thanks Tim

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