The Put-Call-Put (PCP) or Wheel Strategy is a multi-tiered option-selling strategy that incorporates both selling cash-secured puts and covered call writing. In this article, a real-life example, taken from one of my option portfolios, will be analyzed to show the advantages of mastering both strategies.

Graphic representation of the PCP (Wheel) strategy

• #1: Start by selling an OTM cash-secured put
• #2: If and when exercised, the stock or ETF is purchased at a discounted price
• #3: Covered calls are written against the recently purchased shares
• #4: If and when exercised, shares are sold generating the cash to then secure another put trade (back to #1)

Real-life example with Nextracker Inc. (Nasdaq: NXT)

• 11/10/2025: STO 4 x 11/21/2025 $90.00 puts at $0.77 (NXT trading at $106.50)- Put leg
• 11/24/2025: Buy 400 x NXT at $90.00 (“allow” put exercise on 11/21/2025 as NXT below $90.00)
• 11/24/2025: STO 4 x 12/19/2025 $95.00 calls at $3.12 (covered calls)- Call leg 1
• 12/19/2025: NXT closes at $88.34; $95.00 calls expire worthless
• 12/22/2025: STO 4 x 1/16/2026 $95.00 covered calls at $3.51- Call leg 2

Expiration of the 1/16/2026 Call Contracts: 2nd call leg

• NXT closes at $96.36
• Decided to allow assignment and sell 400 shares at $95.00 due to its upcoming earnings report on 1/27/2026

68-day final PCP calculations spreadsheet

Discussion

• Significant returns can be generated with 68-day defensive Put-Call-Put (PCP) or Wheel trades
• Option trades can be crafted to align with all market environments and personal risk tolerance
• In the case of NXT, a significant 68-day return was initially captured and realized (73.95% annualized)
• These are low-risk, not no-risk trades

Expected Price Movement Calculator

The Expected Price Movement Calculator is designed to generate an approximate projected trading range for the underlying security, specific for selected contract expiration date. The at-the-money implied volatility (IV) of the stock or ETF (exchange-traded fund) is used to achieve this valuable information.

Inherent in the spreadsheet is a conversion formula that recalibrates the annualized IV stat into one specifically for the contract being traded. Easily accessed option-chain data is entered into the white cells at the top of the spreadsheet and calculations will appear in the yellow cells below.

Click here for a video & more.

Free training resources

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

1. MoneyShow Masters Symposium Las Vegas

Tuesday July 21, 2026

Caesars Palace Hotel, Las Vegas

Title: The Put-Call-Put (PCP) or Wheel Strategy

Subtitle: Generating cash flow & buying shares at a discount using covered call writing and cash-secured puts 

Description:

Selling stock options is a proven way to lower our cost-basis and beat the market on a consistent basis. Two such low-risk strategies are covered call writing and selling cash-secured puts. This presentation will detail how to incorporate both strategies into one multi-tiered option-selling strategy where we either generate cash-flow or buy stock at a discount. I refer to this as the Put-Call-Put (PCP) Strategy, also referred to as the wheel strategy.

The basics and pros and cons are discussed as well as a real-life example and introduction into the BCI Trade Management Calculator (TMC). This seminar is appropriate for those who look to generate modest, but repeatable, returns which will enable us to beat the market on a consistent basis while focusing on capital preservation.

2. Mad Hedge Investor Summit

Tuesday September 15, 2026

12 PM ET – 1 PM ET

Topic, description & registration link to follow.

3. Toronto Money Show

September 24 – 25, 2026

MaRS Center, Toronto Canada

4. Orlando Money Show

October 5 – 7, 2026

Hilton Orlando Lake Buena Vista

Details to follow.

5. American Association of Individual Investors: NYC Chapter

Date and time to be confirmed.

6. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027

Zoom presentation

All-day paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details to follow.

Alan,

For the past 6 months, I have been writing covered calls in my non-sheltered long-term buy-and-hold portfolio. I’ve been averaging an additional 8% annualized return on this portfolio and quite pleased with these results.

How should I integrate the option Greeks into this trade plan. I want to learn as much as possible and keep these returns coming.

Thanks for all you do,

Hank

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Best Discounted Packages:

1. BCI Package, our Best and most Comprehensive Investment package:
⁠https://thebluecollarinvestor.com/minimembership/bci-investor-program/

2. TCM Package – BCI Trade Management System:
⁠https://thebluecollarinvestor.com/minimembership/bci-trade-management-system/

3. CEO Package – Includes TMC Package:
⁠https://thebluecollarinvestor.com/minimembership/ceo-package/

4. Credit Spread Management System
https://www.thebluecollarinvestor.com/the-bci-credit-spread-management-system/

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• For those new to Alan’s system of Covered Call Writing, be sure to take the Free Beginners Corner Series
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To enter your questions to “Ask Alan”, fill out the form on the contact page. Be sure to begin your message with “ASK ALAN”

The most well-known form of cryptocurrency is Bitcoin. I am frequently asked about the use of crypto with our covered call and cash-secured put trades. In this article, a 29-day collar trade s analyzed, using Bitcoin, to construct a defensive, modest-return trade. A real-life example with iShares Bitcoin Trust (Nasdaq: IBIT) is presented.

What is IBIT?

This is an exchange-traded fund (ETF). The shares are intended to constitute a simple means of making an investment similar to an investment in bitcoin rather than by acquiring, holding and trading bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange. Since the implied volatility of this security is robust, there is flexibility that allows us to craft low-risk (not no-risk) trades that still offer significant initial time-value returns.

What is a collar trade?

This is a covered call writing-like strategy where a protective put is added to a covered call writing trade. The 3 legs of the trade are:

• Long stock position
• Short call position (ceiling)
• Long put position (floor)- This establishes a hard floor

Here is an image of the collar strategy:

Real-life collar trade with IBIT

• 1/23/2026: 500 x IBIT purchased at $50.55
• 1/23/2026: STO 5 x 2/20/2026 $52.00 calls at $1.65 (ceiling)
• 1/23/2026: BTO 5 x 2/20/2026 $48.00 puts at $1.08 (floor)

IBIT call & put option chains for this collar trade

• The $52.00 call strike showed a bid price of $1.65 (yellow oval & cell)
• The $48.00 put strike showed an ask price of $1.08 (brown oval & cell)

Calculations without the protective put (covered call aspect)

• The BCI Trade Management Calculator (TMC) is used for these calculations
• This is a traditional 29-day covered call trade (red circle)
• The breakeven price point is $48.90 (yellow cell)
• The initial premium returns are 3.26%, 41.08% annualized (brown cells)
• There is additional upside share appreciation potential of 2.87% (purple cell)
• Total cash collected from the sale of the 5 call contracts is $825.00 (pink cell)

Calculations using the BCI Collar Calculator (adding the protective put)

• This is actually a 29-day trade when including the day of trade entry
• The net option credit is $0.57 ($1.65 – $1.08)
• Red arrow: The initial return on the net option credit is 1.13%
• Blue arrow: The annualized return on the collar trade is 14.70%
• Green arrow: If the share price moves above the call strike by expiration, a 4% return is realized (maximum return)
• Pink arrow: The max return annualized to 52.09%
• Purple arrow: If share price moves below the put strike, there is a loss of 3.92% (max loss)
• Yellow arrow: The max loss annualizes to 51.06%

Can we calculate collar trades using the BCI Trade Management Calculator?

Yes, here’s how: When entering the call option premium in the spreadsheet, enter a net credit amount. In this trade it is $0.57 ($1.65 – $1.08).

Alan Ellman’s Complete Encyclopedia for Covered Call Writing Volume-2

An adjunct to the original Volume 1 with new and enhanced information on low-risk wealth-building strategies for average investors, utilizing stocks and options to create monthly cash flow.

Click here for more information.

Free training resources

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

1. MoneyShow Masters Symposium Las Vegas

July 20 – 22, 2026

Caesars Palace Hotel

Las Vegas

Details to follow.

2. Toronto Money Show

September 24 – 25, 2026

MaRS Center, Toronto Canada

3. Orlando Money Show

October 5 – 7, 2026

Hilton Orlando Lake Buena Vista

Details to follow.

4. American Association of Individual Investors: NYC Chapter

Date and time to be confirmed.

5. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027

Zoom presentation

Paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details to follow.

Analysis of a real-life Intel Corp. (INTC) covered call trade to show why large option premiums can be misleading. Using the Trade Management Calculator, he breaks down intrinsic value, time value return, annualized return, downside protection, break-even price, and earnings risk.

The key lesson: a large cash premium may look attractive, but investors must calculate the true time-value return and evaluate the risk before entering covered call or cash-secured put trades.

Free Resources:
https://thebluecollarinvestor.com/minimembership/bci-free-resources/

Premium Membership:
⁠https://thebluecollarinvestor.com/minimembership/premium-membership/

Best Discounted Packages:

1. BCI Package, our Best and most Comprehensive Investment package:
⁠https://thebluecollarinvestor.com/minimembership/bci-investor-program/

2. TCM Package – BCI Trade Management System:
⁠https://thebluecollarinvestor.com/minimembership/bci-trade-management-system/

3. CEO Package – Includes TMC Package:
⁠https://thebluecollarinvestor.com/minimembership/ceo-package/

4. Credit Spread Management System
https://www.thebluecollarinvestor.com/the-bci-credit-spread-management-system/

]]> https://www.thebluecollarinvestor.com/bci-podcast-173-large-returns-can-be-enticing-we-must-do-the-math-to-make-sensible-trades/feed/ 0 https://www.thebluecollarinvestor.com/how-to-establish-a-bear-market-cash-secured-put-trade-2/ https://www.thebluecollarinvestor.com/how-to-establish-a-bear-market-cash-secured-put-trade-2/#comments Sat, 30 May 2026 10:33:59 +0000 https://www.thebluecollarinvestor.com/?p=213546

When we sell cash-secured puts, we are contractually obligated to buy shares at the strike price by the expiration date, should the option buyer decide to exercise that option. In the BCI methodology, we predominantly favor out-of-the-money (OTM) put strikes, agreeing to buy the shares at a lower price than current market value.

In bear market environments, we may favor deep OTM put strikes to enjoy the benefit of greater protection to the downside in return for lower option premiums. In this article, we will use one of the option Greeks, delta, to determine strike selection in these situations.

What is delta?

One of the 3 definitions of delta is the approximate probability of a strike expiring in-the-money (ITM) or with intrinsic-value. When this occurs, the option will (almost always) be exercised and shares will be put to the option-seller at the strike price (assuming no exit strategy integration). Typically (but, not always), put sellers want to avoid buying the shares, so delta will measure and quantify that risk. As we go deeper and deeper OTM (strikes much lower than current market value), the risk of exercise becomes less and less as do the option premiums. We must find a balance between risk and returns when establishing our trades.

Real-life example with Solaris Energy Infrastructure Inc. (NYSE: SEI)

On 1/22/2026, SEI was trading at $56.95. Let’s review the put option chain and look for strikes with deltas < 10%. Note that deltas for puts show a minus (-) sign because put value is inversely related to share price movement.

SEI option chain on 1/22/2026 (SEI: $56.95)

• Red oval: Expiration date is 2/20/2026
• Pink row: $35.00 strike, delta = 4%, bid price = $0.20
• Brown row: $37.50 strike, delta = 6%, bid price = $0.40
• Yellow row: $40.00 strike, delta = 9%, bid price = $0.70
• Note that the lower the risk of exercise (delta), the lower the premium returns
• Let’s calculate the % returns using the BCI Trade Management Calculator (TMC), so we can weigh the risk against the returns

SEI Initial put calculations for the 3 deep OTM strikes

• Red arrow: The $35.00 strike has a delta of 4% and an annualized return of 6.99% (brown cells)
• Blue arrow: The $37.50 strike has a delta of 6% and an annualized return of 13.12% (pink cells)
• Green arrow: The $40.00 strike has a delta of 9% and an annualized return of 21.67% (gray cells)
• The % purchase discount if shares are assigned as a result of exercise (share price moves below the deep OTM strike) ranges from 30.99% to 38.89% (purple cells)

Discussion

In bear markets, we may favor deep OTM put strikes to create greater protection to the downside. Delta is a useful metric that can be implemented to quantify the risk of exercise of the available strikes. We balance risk of exercise with premium returns to guide us to the most appropriate put strikes.

Poor Man’s Covered Call Calculator

The PMCC Calculator is designed to determine initial trade structure and status as well as various position management price point considerations the exit strategy price buyback points to buy back the short calls based on the 20%/10% guidelines detailed in the BCI books and DVD Programs.

For an informational video and more details, click here.

Free training resources

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

1. Mad Hedge Investor Summit

June 3, 2026

12 PM ET – 1 PM ET

Covered Call Writing

Uncovering a 3^rd Income Stream in Our Investment Portfolios

Increasing profits and avoiding tax issues using stock options

You have owned shares of stock in your non-sheltered accounts for many years. Share value has been appreciated significantly over time. This has put a smile on your face. Many of these securities have also generated dividend income. This, too, has pleased you. However, there is a 3^rd income stream that you can activate right now, leveraging these same stocks, using a strategy known as covered call writing.

This is a low-risk option selling strategy analogous to generating rental income with a real estate investment property. Yes, renting out your stocks for limited periods. We have 2 goals: generate a 3^rd income stream + retain the underlying shares to avoid negative capital gains issues.

This presentation will analyze how to implement this form of covered call writing, known as Portfolio Overwriting, always with capital preservation in mind.

Details & registration link.

2. American Association of Individual Investors: NYC Chapter

Date and time to be confirmed.

Via Zoom.

More information to come.

3. MoneyShow Masters Symposium Las Vegas

July 20 – 22, 2026

Caesars Palace Hotel

Las Vegas

Details to follow.

4. Toronto Money Show

September 24 – 25, 2026

MaRS Center, Toronto Canada

5. Orlando Money Show

October 5 – 7, 2026

Hilton Orlando Lake Buena Vista

Details to follow.

6. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027

Zoom presentation

Paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details to follow.

We write an out-of-the-money (OTM) covered call and share price moves up but does not breach the OTM strike by expiration Friday, so the option expires worthless. What price do we enter on Monday for the next expiration cycle? The original price, the price at expiration or the original price minus the original premium? This article will present a real-life analysis of such a scenario, using Bank of America Corp. (NYSE: BAC) to demonstrate the BCI approach.

Real-life example with BAC

• 12/1/2025: Buy 100 x BAC at $53.20
• 12/1/2025: STO 1 x 12/19/2025 $55.00 call at $0.61
• 12/18/2025: BTC 1 x 12/19/2025 $55.00 call at $0.06 (10% guideline). No opportunities to generate additional premium by rolling-down
• 12/19/2025: BAC trading at $54.11 as the contract expired

Initial calculations for the BAC trade

• The BCI Trade Management Calculator shows a 19-day return of 1.15%, 22.03% annualized
• There is an opportunity of an additional upside potential of 3.38%, if BAC moves up to, or beyond the $55.00 strike

Post-adjusted calculations for the BAC trade

• There was share appreciation (unrealized, because shares are not yet sold) to $54.11 (from $53.20)
• The final realized option return was 1.03%
• The unrealized share return was 1.71%
• The final realized/unrealized net return for the 19-day period was 2.74%, 52.64% annualized

What cost-basis should we enter for the next contract cycle?

Since the shares are owned at $54.11 prior to market open, and the previous option profits were calculated for the last contract cycle, we will start with this price for the next cycle. If we didn’t write an option and just calculated share appreciation, we would use $54.11 because previous option and share appreciation were booked for the previous cycle. I do not like using the option profit twice, once to calculate returns and the other to lower cost-basis. I understand that other experts may have a different philosophical approach to the mathematics, but I’m happy to share the how and why of the BCI technique.

Discussion

When an OTM covered call expires worthless on expiration Friday, we use the closing price of the stock when entering our next trade on Monday. One final thought: If we don’t enter another call trade on Monday and wait an extended period of time to do so, use the current market value of the stock at the time of the trade.

Stock Investing for Students: A Plan to Get Rich Slowly and Retire Young

(Educating our youth to financial independence) – 12-Part VIDEO Series + 2 Companion PDF BOOKS

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 and taking advantage of the power of compounding? Change your thinking. Create a goal. Utilize the rich BCI methodology to facilitate your plan. Financial independence is achievable. Start today!

Click here for more information.

Free training resources

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

1. Mad Hedge Investor Summit

June 3, 2026

12 PM ET – 1 PM ET

Covered Call Writing

Uncovering a 3^rd Income Stream in Our Investment Portfolios

Increasing profits and avoiding tax issues using stock options

You have owned shares of stock in your non-sheltered accounts for many years. Share value has been appreciated significantly over time. This has put a smile on your face. Many of these securities have also generated dividend income. This, too, has pleased you. However, there is a 3^rd income stream that you can activate right now, leveraging these same stocks, using a strategy known as covered call writing.

This is a low-risk option selling strategy analogous to generating rental income with a real estate investment property. Yes, renting out your stocks for limited periods. We have 2 goals: generate a 3^rd income stream + retain the underlying shares to avoid negative capital gains issues.

This presentation will analyze how to implement this form of covered call writing, known as Portfolio Overwriting, always with capital preservation in mind.

Details & registration link.

2. American Association of Individual Investors: NYC Chapter

Date and time to be confirmed.

Via Zoom.

More information to come.

3. MoneyShow Masters Symposium Las Vegas

July 20 – 22, 2026

Caesars Palace Hotel

Las Vegas

Details to follow.

4. Toronto Money Show

September 24 – 25, 2026

MaRS Center, Toronto Canada

5. Orlando Money Show

October 5 – 7, 2026

Hilton Orlando Lake Buena Vista

Details to follow.

6. Triple Edge Investing Summit: Technical Analysis • Options Strategies • ETF Mastery

Saturday January 23, 2027

Zoom presentation

Paid event

All-day event hosted by 3 experts:

• Dr. Alan Ellman (options)
• Dr. Eric Wish (technical analysis)
• Les Masonson (ETFs)

Hosted by TraderLion University

Details to follow.

Large cash premiums can attract us into making trades that are not in our best interest. We must be able to calculate the returns over both short and longer timeframes, as well as measure the risk inherent in our trades. In this podcast, a $6,000.00 premium was tempting, but once analyzed, painted a completely different picture. A real-life example with INTC was used to detail these points.

Free Resources:
https://thebluecollarinvestor.com/minimembership/bci-free-resources/

Premium Membership:
⁠https://thebluecollarinvestor.com/minimembership/premium-membership/

Best Discounted Packages:

1. BCI Package, our Best and most Comprehensive Investment package:
⁠https://thebluecollarinvestor.com/minimembership/bci-investor-program/

2. TCM Package – BCI Trade Management System:
⁠https://thebluecollarinvestor.com/minimembership/bci-trade-management-system/

3. CEO Package – Includes TMC Package:
⁠https://thebluecollarinvestor.com/minimembership/ceo-package/

4. Credit Spread Management System
https://www.thebluecollarinvestor.com/the-bci-credit-spread-management-system/

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