Selling cash-secured puts can be used to generate monthly cash flow and to buy a stock at a discount. It can also be used to lower the cost-basis of shares already owned. In November 2018, John shared with me a trade he was in with Halliburton Company (NYSE: HAL) using precisely this strategy. This article will highlight John’s trades and how he incorporated the information into the BCI Put Calculator.

 

John’s trades with HAL as of 10/31/2018

  • John’s portfolio currently has 100 shares of HAL at a cost-basis of $46.02
  • Current price of HAL is $35.31
  • 10/31/2018: Sell 1 out-of-the-money cash-secured $33.50 put for $0.64

 

Calculations with BCI Put Calculator

 

selling cash-secured puts calculations

HAL Put Calculations with Cost-Basis Data

 

Additional data added to calculator

John added the following data:

  • F6 (Yellow cell at top): Portfolio account number
  • F35 (Yellow cell on bottom): Total cost-basis of 100 shares currently owned
  • F36 (Pink cell): Cost of 100 shares if put is exercised (also cell F22)
  • F37 (Green cell): Average cost-per-share for 200 shares if put is exercised

 

Strategy benefit

By selling out-of-the-money cash-secured puts, the cost-basis per-share is lowered from $46.02 to $39.44, if exercised. If the put remains out-of-the-money and expires worthless, a 1.95%, 30-day return has been generated.

***The stock repair strategy is another approach to lowering cost-basis when share value declines in a stock-only portfolio.

 

Discussion

Selling cash-secured puts has many applications including generating monthly cash flow, buying stocks at a discount and the strategy highlighted in this article, lowering cost-basis per share.

 

Colleges using my book, Stock Investing for Students as required reading for their finance/investing courses

  • University of Maryland
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  • Florida State College at Jacksonville
  • University of Maine

I will provide a complimentary copy of a Q&A test book I created based on all chapters in this book to all instructors using this book. Please send the request on school letterhead or with a school email address.

 

Alan highlighted in Spain’s Traders’ Magazine

 

 

 

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:

Alan,

First of all, I want to thank you for your wonderful, simple and clear videos on covered calls and cash-secured puts on your YouTube channel. Your slow-paced, clearly-explained videos were God sent to me to understand the mechanics.

Thank you sincerely for these videos.

Haltore

 

 

Upcoming events

-May 13th

All Stars of Options

Bally’s Hotel, Las Vegas

10 AM – 10:45 AM

How to Select the Best Options in Bull and Bear Markets

Free event

-May 14th

Las Vegas Money Show

Bally’s/ Paris Hotel

12:15 – 3:15

Master class encompassing covered call writing, put-selling and the stock repair strategy

This is a paid event hosted by The Money Show

***Alan will also be doing book-signing event at The Las Vegas Money Show

 

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Market tone data is now located on page 1 of our premium member stock reports.

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