Understanding Brokerage Statements for Covered Call Writing: A Real-Life Example with Energy Select Sector SPDR ETF (NYSE: XLE)


Our covered call writing and put-selling broker statements can be confusing when starting our option-selling careers. This article will detail the first 3 steps of our covered call trades (stock purchase, option sale and buy-to-close limit order) using XLE as reflected in one of my broker accounts.

 

Purchase of shares to initiate a covered position

 

XLE: Buy 500 Shares

 

500 shares were bought at $43.74 per-share. This puts us in a “covered” or protected position… we know our cost-basis. The trade was entered as a market order, day only trade.

 

Sell the call options to complete the initial covered call trade and set the 20% BTC limit order

 

XLE: Sell Covered Call and Set BTC Limit Order

  • 5 call contracts were sold at $1.06 and the order was filled
  • Immediately, after entering the trade, a buy-to-close limit order was set at $0.20 (20% of $1.06)
  • The last trade was set at GTC (good until cancelled) and is currently “open”

 

Portfolio position after the covered call trade is executed

 

XLE: Portfolio Positions after Executing a Covered Call Trade

 

  • 500 shares were purchased at a cost-basis of $21,870.00
  • 5 call contracts were sold (negative, reflecting the short position)
  • Total cash generated is $526.00 (also negative reflecting an open short sale)
  • The $526.00 is cash in our brokerage account and available for trading

 

 Discussion

Covered call writing and put-selling are strategies that, once mastered, will allow us the opportunity to beat the market on a consistent basis. Understanding the accounting procedures of a broker statements is also critical to our overall success.

 

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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:

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Although, 2020 was a tough year for a lot of reasons, I feel really blessed to have discover your services…I learned lot of really useful things, your weekly letters are great and consistent and another great advantage is that you guys are always there to answer questions.

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Upcoming event

BCI-Only Webinar: Free Webinar Covered Call Writing and Selling Cash-Secured Puts

Covered Call Writing and Selling Cash-Secured Puts: 2 New Strategies Developed by BCI

The VOLQ-covered call strategy and Weekly 10-Delta Put-Selling strategy

August 19, 2021 (Thursday)

8 PM – 9:30 PM ET

  • A link will be posted on the BCI site and emailed to all those on our mailing list as the event approaches
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Alan speaking at a Money Show event

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