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2019issue C0310-13

Weekly covered-call writing as a two-book credit-spread case

This archive case works a weekly expiration cycle that sells an at-the-money call and buys a higher same-week call against a long stock lot. Editorial reading: keep the option book on a one-week clock and the stock lot open, so assignment, carry, and the next strike roll can be scored as one procedure rather than as a leftover quarterly sale.

  • Earlier covered-call writing rewrote a short call on a quarterly and then a monthly calendar. Weekly listings made a one-week rewrite cycle available.
  • The overlay sells an at-the-money short leg and buys a higher same-week call no more than 15 points above it, forming a call credit spread against the long stock lot.
  • Worked outcomes close the option legs on expiration Friday and leave the stock open, so weekly value mixes realized option cash with an unrealized stock mark.
  • After Friday, an unchanged 320 close rewrites 320/335, a move to 325 rewrites 325/340, and a move to 335 rewrites 335/350.
Entries in this reading3 entries
Current trackCovered call writing31 readingsOption income strategy43 readingsOption spread61 readings

From quarterly and monthly rewrites to a weekly clock

Earlier covered-call writing rewrote a short call on a quarterly calendar and then on a monthly calendar. Later weekly listings made a one-week rewrite cycle available. The archive case uses that weekly expiration cycle. The option overlay is opened, marked to Friday settlement, and then rewritten.

The overlay is a call credit spread

The overlay sells an at-the-money call and buys a higher same-week call against a long stock lot. The pair forms a call credit spread instead of a single covered short call. The long call is specified as no more than 15 points above the at-the-money short strike. The at-the-money short leg sits at the strike nearest the stock print.

Worked 320/335 snapshot

In the worked chain the pair is 320 and 335. With the underlying at 320.87, the 320 call is about 11.60 and the 335 call is 5.70, so the 320/335 spread posts a 5.90 credit.

Six Friday paths and split books

Each weekly expiration is scored on six paths: unchanged, small advance, advance, large advance, small decline, and large decline. Worked outcomes close the option legs on the weekly expiration Friday and leave the stock open. Weekly value mixes realized option cash with an unrealized stock mark. That is split P&L books: option cash is booked as realized at weekly expiration, while the stock remains open and is marked as unrealized.

The next strike roll

An unchanged 320 close rewrites 320/335. A move to 325 rewrites 325/340. A move to 335 rewrites 335/350. The strike roll replaces the expired spread with a new pair whose short strike follows the latest stock print.

Selection rule in the case

The selection rule requires liquid weekly listings and a near-term upward bias in the underlying.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
23 of 25 in the Covered call writing track
201928-35 pp.Next on Covered call writingWeekly option income as one holding-period caseThe weekly procedure can be applied over a short or longer holding period while the same credit-spread overlay remains in force as the stock path changes.
All readings on this track · 25 readings
  1. 1995Sequenced covered-call repair after a growth-stock drawdown
  2. 1996Covered-call writing as income and assignment discipline
  3. 1997Relative volatility rank for covered-call overlays
  4. 1997Covered call time, probability, and implied volatility
  5. 1999Covered-call income when implied volatility is cheap
  6. 2000Covered-call income and assignment flexibility
  7. 2002Covered-call expiration rate versus expected value
  8. 2003Covered-call versus diagonal housing after a single-name drawdown
  9. 2003Covered-call overlay on a stock portfolio as a payoff case study
  10. 2003Ratio backspread and covered-call assignment construction
  11. 2004Covered-call income is not a safety net
  12. 2006Evaluating consecutive covered calls across market regimes
  13. 2007A job-first audit of commodity options in a futures book
  14. 2011Horizon checks on Covered call writing, the risk-reward ratio, and the Relative Strength Index
  15. 2012From ex-date verticals to leftover buy-writes, and a call backspread that stays net long
  16. 2013Year-long covered calls on high-yield industrials
  17. 2014Year-horizon covered calls on Dow yield ranks
  18. 2014Covered-call premium as a cost-basis cushion
  19. 2014Monthly buy-write construction with traffic-light exits
  20. 2017Low-volatility covered calls need a real premium buffer
  21. 2017Covered-call futures income as one testable procedure
  22. 2018Partial covered-call overlays at targets, resistance, and rich volatility
  23. 2019Weekly covered-call writing as a two-book credit-spread case
  24. 2019Weekly option income as one holding-period case
  25. 2019Locking long-call profit with a temporary overlay
By fieldOptions and volatility171 readingsBy year201975 readings
All 31 readings tagged Covered call writing
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