Should We Get the Kleenex or the Champagne? A Real-Life Trade with Bilibili Inc. (Nasdaq: BILI)

On 12/9/2022, Patrik sent me an email he titled “Covered Call Panic” He shared with me information on his trades and was distraught at the current outcome. This article will analyze whether Patrik actually needed Kleenex to cry over these trades or, perhaps, champagne to celebrate. Patrik’s email to Alan Hi Alan, I read an in-depth article of yours about covered calls and as a newbie, I’m currently in quite a pickle that I’m trying to understand and potentially do something about! I got 1000 shares of $Bili and placed covered call options on them with strike prices of $14 and $17 and unfortunately the stock flew up during these past two weeks to $24 where the little bit of premium received (~$2K) is nothing compared to the current gain of the underlying long stocks (~$10K). The covered calls are due mid-January. Is there any way I can reverse/sell/execute/assign them earlier for a profit here – or am I doomed to hold on until mid-January and will have to be satisfied with just the premium received upfront? I’m a newbie to covered calls and can’t find an answer to this on Google! Any help/guidance from you would be super appreciated! Best regards, Patrik BILI/ S&P 500 1-year comparison chart BILI: Volatile Chart Pattern The blue arrows show the volatility of BILI which is a reflection of the high risk and impressive option premiums inherent in these trades. Patrik did not share with me all the specifics of these trades, but certain conclusions can be made and a decision, at this point in time, if we are headed for the Kleenex or champagne. Alan’s responses to Patrik Hi Patrik, No need to panic. A few comments you should find useful: As long as the $14 and $17 calls are in place, the shares can be worth no more than those strikes As of now, you have an unrealized maximum gain on these trades as they were initially established (accepted the premium and agreed to sell your shares at the strike) You do not have to wait to close the trade, you can close at any time by buying back the calls and selling (or holding) the stock Buying back the call, will make the shares worth current market value, but the cost will be the difference between the strike and current market value + a time-value component As an example, if you sold the 1/6/2023 $17.00 call and shares are now worth $25.76, the posted cost-to-close the $17.00 call is $9.70 per-share. If that is done, shares are now worth $25.76 or an additional $8.76 above the previous strike. This means, you are paying $0.94 in time-value to close the $17.00 call. You can then sell a higher strike call if you feel that share price will continue to accelerate Bili is an extremely volatile security. It can go down as fast as it went up. Great premiums, but great risk with these type of underlying securities Bottom line: You haven’t lost $. You have maximized your profits (unrealized until the trade is concluded) as the trade was initially crafted. In other words, champagne rather than Kleenex in this case. Best regards, Alan Discussion Patrik accepted the premium return as the trades were initially established and, when share price accelerated, had significant downside protection of the maximum profit. If we have embraced a particular strategy and have maximized the returns on trades using this investment approach, which cabinet should we head for? It is an exercise in futility to say that if another strategy was used, a better outcome would be realized. Let’s enjoy our successful trades and head for the champagne. One other thought When share price accelerates well above our covered call strikes, we can consider the mid-contract unwind (MCU) exit strategy. This may create an opportunity to generate greater than a maximum return with the same cash investment. Click here for is a link to an article I published on this topic. This, and all other exit strategies, are detailed in my 8th book, Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts. Premium Member Benefits Video: This is a great time to join our premium member community with its stock screening and educational (over 250 videos) benefits. We offer more benefits than ever before. For information, click here. For video explanation, click here. 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. I’m sure that your new program is being well received. I know that you thanked everyone for helping put you on the map – but, my friend, it was you who decided to share your expertise with the world…. So the real thanks goes to you !!! What goes around, comes around…. THANK YOU.. Frank Upcoming events 1. Mad Hedge Investor Summit June 14th at 11 AM ET – 12 PM ET Exit Strategy Choices After Exercise of Cash-Secured Puts When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. Typically, we only sell puts on elite-performers that we would be agreeable to own in our portfolio. This presentation will analyze 4 potential exit strategy opportunities to consider should the put option be exercised. Information on the following strategies will be highlighted: Selling the stock Holding the stock in our long-term buy-and-hold portfolio Write a covered call (PCP or “wheel” strategy) Implement the stock repair strategy In addition to these strategies, the following topics will also be included in the webinar: Option basics for selling cash-secured puts Option basics for covered call writing Real-life examples Calculations using the BCI Trade Management Calculator (TMC) Event super discount offer There will be information offered to all levels of options trades, from beginners to advanced. Register for free here. 2. Your Mid-Year Portfolio Review Virtual Expo June 27th 11:20 AM ET – 12 PM ET Ultra-Low Risk Approaches to Covered call Writing and Selling Cash-Secured Puts Adding Delta and Implied volatility to existing defensive concepts Covered call writing and selling cash-secured puts are low-risk, option-selling strategies focused on generating cash-flow. Our trades can be structured to represent aggressive or defensive postures or somewhere in between. This presentation will detail how to structure our trades to decrease risk, particularly in bear and volatile market conditions while still generating significant returns. It will also be of interest to investors who have a low personal risk-tolerance but still want to generate higher than risk-free returns. Both Delta (an option Greek) and implied volatility will be spotlighted, and real-life examples will be utilized to demonstrate the process of establishing these conservative trades, while still allowing us the potential to generate significant annualized returns. Registration for free here. 3. Wealth365 Investor Summit July 10th -11th Covered Call Writing: Multiple Applications Based on Current Market Conditions Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ) Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are: Normal to bull markets Bear and volatile markets Low interest-rate environments A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances. July 10th -11th Covered Call Writing: Multiple Applications Based on Current Market Conditions Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ) Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are: Normal to bull markets Bear and volatile markets Low interest-rate environments A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances. Register for free here. Date and time to follow. 4. Orlando Money Show Live Event October 29th – October 31st Details to follow. 5. AAII Orange County, California Chapter Saturday November 11, 2023 Details to follow. Alan speaking at a Money Show event********************************************************************************************************************** [Image] Here are Some More Investing Tips and Resources. Enjoy! Sponsored [You Can’t Escape Inflation So Profit From It Here]( “Inflation is bad” – yeah we all get it. There’s nothing you can do to stop it though. If you can’t beat ‘em – join ‘em. That means learning to leverage inflation to build your wealth instead of devaluing it.[Claim Your Copy Of Our Research Report FREE]( By clicking this link you are subscribing to Conservative Investor News’s Newsletter and may receive up to 2 additional free bonus subscriptions. Unsubscribing is easy [Privacy Policy/Disclosures]( [Should We Get the Kleenex or the Champagne? A Real-Life Trade with Bilibili Inc. (Nasdaq: BILI)](?site= On 12/9/2022, Patrik sent me an email he titled “Covered Call Panic” He shared with me information on his trades and was distraught at the current outcome. This article will analyze whether Patrik actually needed Kleenex to cry over these trades or, perhaps, champagne to celebrate. Patrik’s email to Alan Hi Alan, I read an in-depth article of yours about covered calls and as a newbie, I’m currently in quite a pickle that I’m trying to understand and potentially do something about! I got 1000 shares of $Bili and placed covered call options on them with strike prices of $14 and $17 and unfortunately the stock flew up during these past two weeks to $24 where the little bit of premium received (~$2K) is nothing compared to the current gain of the underlying long stocks (~$10K). The covered calls are due mid-January. Is there any way I can reverse/sell/execute/assign them earlier for a profit here – or am I doomed to hold on until mid-January and will have to be satisfied with just the premium received upfront? I’m a newbie to covered calls and can’t find an answer to this on Google! Any help/guidance from you would be super appreciated! Best regards, Patrik BILI/ S&P 500 1-year comparison chart BILI: Volatile Chart Pattern The blue arrows show the volatility of BILI which is a reflection of the high risk and impressive option premiums inherent in these trades. Patrik did not share with me all the specifics of these trades, but certain conclusions can be made and a decision, at this point in time, if we are headed for the Kleenex or champagne. Alan’s responses to Patrik Hi Patrik, No need to panic. A few comments you should find useful: As long as the $14 and $17 calls are in place, the shares can be worth no more than those strikes As of now, you have an unrealized maximum gain on these trades as they were initially established (accepted the premium and agreed to sell your shares at the strike) You do not have to wait to close the trade, you can close at any time by buying back the calls and selling (or holding) the stock Buying back the call, will make the shares worth current market value, but the cost will be the difference between the strike and current market value + a time-value component As an example, if you sold the 1/6/2023 $17.00 call and shares are now worth $25.76, the posted cost-to-close the $17.00 call is $9.70 per-share. If that is done, shares are now worth $25.76 or an additional $8.76 above the previous strike. This means, you are paying $0.94 in time-value to close the $17.00 call. You can then sell a higher strike call if you feel that share price will continue to accelerate Bili is an extremely volatile security. It can go down as fast as it went up. Great premiums, but great risk with these type of underlying securities Bottom line: You haven’t lost $. You have maximized your profits (unrealized until the trade is concluded) as the trade was initially crafted. In other words, champagne rather than Kleenex in this case. Best regards, Alan Discussion Patrik accepted the premium return as the trades were initially established and, when share price accelerated, had significant downside protection of the maximum profit. If we have embraced a particular strategy and have maximized the returns on trades using this investment approach, which cabinet should we head for? It is an exercise in futility to say that if another strategy was used, a better outcome would be realized. Let’s enjoy our successful trades and head for the champagne. One other thought When share price accelerates well above our covered call strikes, we can consider the mid-contract unwind (MCU) exit strategy. This may create an opportunity to generate greater than a maximum return with the same cash investment. Click here for is a link to an article I published on this topic. This, and all other exit strategies, are detailed in my 8th book, Exit Strategies for Covered Call Writing and Selling Cash-Secured Puts. Premium Member Benefits Video: This is a great time to join our premium member community with its stock screening and educational (over 250 videos) benefits. We offer more benefits than ever before. For information, click here. For video explanation, click here. 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. I’m sure that your new program is being well received. I know that you thanked everyone for helping put you on the map – but, my friend, it was you who decided to share your expertise with the world…. So the real thanks goes to you !!! What goes around, comes around…. THANK YOU.. Frank Upcoming events 1. Mad Hedge Investor Summit June 14th at 11 AM ET – 12 PM ET Exit Strategy Choices After Exercise of Cash-Secured Puts When we sell cash-secured puts, we are undertaking the contractual obligation to buy shares at the strike price by the expiration date. Typically, we only sell puts on elite-performers that we would be agreeable to own in our portfolio. This presentation will analyze 4 potential exit strategy opportunities to consider should the put option be exercised. Information on the following strategies will be highlighted: Selling the stock Holding the stock in our long-term buy-and-hold portfolio Write a covered call (PCP or “wheel” strategy) Implement the stock repair strategy In addition to these strategies, the following topics will also be included in the webinar: Option basics for selling cash-secured puts Option basics for covered call writing Real-life examples Calculations using the BCI Trade Management Calculator (TMC) Event super discount offer There will be information offered to all levels of options trades, from beginners to advanced. Register for free here. 2. Your Mid-Year Portfolio Review Virtual Expo June 27th 11:20 AM ET – 12 PM ET Ultra-Low Risk Approaches to Covered call Writing and Selling Cash-Secured Puts Adding Delta and Implied volatility to existing defensive concepts Covered call writing and selling cash-secured puts are low-risk, option-selling strategies focused on generating cash-flow. Our trades can be structured to represent aggressive or defensive postures or somewhere in between. This presentation will detail how to structure our trades to decrease risk, particularly in bear and volatile market conditions while still generating significant returns. It will also be of interest to investors who have a low personal risk-tolerance but still want to generate higher than risk-free returns. Both Delta (an option Greek) and implied volatility will be spotlighted, and real-life examples will be utilized to demonstrate the process of establishing these conservative trades, while still allowing us the potential to generate significant annualized returns. Registration for free here. 3. Wealth365 Investor Summit July 10th -11th Covered Call Writing: Multiple Applications Based on Current Market Conditions Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ) Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are: Normal to bull markets Bear and volatile markets Low interest-rate environments A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances. July 10th -11th Covered Call Writing: Multiple Applications Based on Current Market Conditions Real-life examples with Invesco QQQ Trust (Nasdaq: QQQ) Covered call writing is a low-risk option-selling strategy geared to generating cash flow with capital preservation a key requirement. This presentation will demonstrate how the strategy can be crafted to benefit in all market environments. Market situations highlighted are: Normal to bull markets Bear and volatile markets Low interest-rate environments A popular large-cap technology exchange-traded fund, Invesco QQQ Trust, will be used to establish rules and guidelines to benefit in these market circumstances. Register for free here. Date and time to follow. 4. Orlando Money Show Live Event October 29th – October 31st Details to follow. 5. AAII Orange County, California Chapter Saturday November 11, 2023 Details to follow. 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