Using the BCI Trade Management Calculator to Mitigate Losses


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Our covered call writing positions are at risk when share price declines substantially. We do have, however, our exit strategy arsenal to protect against catastrophic losses. This article will show a real-life example of such a scenario with Novo Nordisk A/S (NYSE: NVO), in a series of trades shared with me by a BCI Premium Member.

NVO trades start-to-finish

5/22/2023: Buy 500 x NVO at $170.48

5/22/2023: STO 5 x 6/16/2023 $170.00 calls at $4.96

5/30/2023: BTC 5 x 6/16/2023 $170.00 calls at $0.45

6/1/2023: STO 5 x 6/16/2023 $157.50 calls at $4.00 (rolled-down)

6/1/2023: BTC 5 x 6/16/2023 $157.50 calls at $2.00

6/1/2023: Sell 500 shares of NVO at $154.78

Price chart of NVO showing the 3 trade dates

Trade entries & calculations using the BCI Trade Management Calculator (TMC)

Note that the final calculations (lower left of screenshot) reflect a loss for the 500 shares of $4595.00 or 5.39%. Could this loss have been mitigated? Yes!

The spreadsheet shows our exit strategy guideline price points. These were not adhered to. For example, the 1st BTC was at $0.45, not $0.99. This was an opportunity lost.

When viewing the price chart, we see at least 1 additional rolling-down opportunity prior to 5/30/2023, perhaps 2. Also, using the 7% guideline would direct us to sell the shares at $158.55, rather than $154.78.

Discussion

All in all, following the BCI exit strategy guidelines would have mitigated losses significantly. Not all trades will be winning ones. One of our missions is to utilize position management to mitigate losses and enhance gains.



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This is Alan’s financial literacy book (not option-related), currently used in 4 universities in the US.

Self-investing starting at a young age can ensure a successful financial future and an early and comfortable retirement. So why is nobody doing this? The answer includes such factors as the social pressures facing our youth, certain pre-conceived ideas regarding our ability to successfully self-invest and the education or lack thereof needed to motivate our youth to undertake such a long-term project. The purpose of this book is to change that way of thinking and create a goal and a user-friendly methodology that will facilitate a plan which will allow you to retire financially secure at a relatively young age.


Click here for more information and purchase link.

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

Hi Alan and team,

Thank you for putting out such great content.

Keep up the awesome work.

Kind regards,

Ed

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Thursday November 9, 2023

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Selling Cash-Secured Puts: Multiple Applications

Selling cash-secured puts is a low-risk option strategy geared to generating cash-flow, but always with capital preservation in mind.

This presentation will detail the strategy, incorporating the 3-required skillsets necessary to achieve the highest levels of returns … stock selection, option selection and position management.

If we allow exercise of the put options, shares are put to us at a price we agreed upon. What is our next step? This seminar will discuss potential paths we can take and the rationale behind these decisions, using real-life examples and calculations.

Q&A will include covered call writing, cash-secured puts and related strategies.

Zoom link will be sent to all those who register.

2. AAII Orange County, California Chapter

AAII Investment Club members only

Saturday November 11, 2023

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3. Mad Hedge Investor Summit

December 5 – 7

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4. Long Island Stock Traders Meetup Group

Thursday February 15, 2024

7:30 PM ET – 9:00 PM ET.

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Alan speaking at a Money Show event*********************************************************************************************************************