Circular P-C-P Option Strategy

Honest and Open sharing By Seon

Alan Ellman’s Option Strategy

Circular PCP Strategy (see below diagram)

Book Review on Alan Cash-Secured Puts/

Why use P-C-P strategy

Pro

• Almost pow chiak

• Sell option only

• Concurrent activities

• Monthly Income

• Beginner can pick up fast

• Mechanical

• Relatively safe

Con

• Slow

• Boring

• Low ROI

• Extreme price movement

• Not 100% win all the time

• Some losses are to be expected

• Neutral or Bull condition

• Not effective use capital/margin

Integrating Information to Knowledge

Option level : Basic Only two action : 1. Sell Put (intent to buy stock at low price) 2. Sell Call (intent to sell away stock at higher price) Period : Monthly (expiration month) Stock Condition : Slightly bearish to bullish Underlying : For beginner chose growing ETF or low volatility stock For more advance ; stocks or leverage ETF (3x) (However beware of notable event) Diversification : At least 5 ETF or stocks and different sector Mindset : 3% rule to cut loss and position sizing

That is Alan Ellman P-C-P strategy! Now, I share from how I copy his strategy and integrate it to my option style

Step 1 – Sell cash-secured PUT

Prefer to sell OTM put (collect monthly income)

• If price above - do nothing

• If NTM – check news, no major impact, do nothing

• If bad news, can do adjustment (rolling, inversion etc)

• Else get ready for assignment (game on)

Integrating Information to Knowledge Selling Put consider bullish or flat trend. Can use Linear Regression channel and below consider anything below the 25% line (one of these cannot sell put)

Step 2 –Sell covered CALL (Fun begin)

CoveredCall

Premium Protection Capital Gain

Sell ITM (Bearish)

High Good Zero

Sell ATM (Neutral)

Med Zero Zero

Sell OTM (Bullish)

Low Zero High

Three ways to sell covered call ITM, ATM and OTM (all three can collect premium)

Option Chain on Call ITM, ATM and OTM

ATM

OTM

ITM

One month

Assume Assignment at $68.50 Current Price $68.71

Sell Covered Call : ITM, ATM and OTM

Covered Call

SP Premium Protection Capital Gain Total gain is

ITM $66.5 $2.95 $2 0 $0.95

ATM $68.5 $1.55 0 0 $1.55

OTM $70.5 $0.65 0 $2 $2.65

Assume Assignment at $68.50 Current Price $68.71 DTE = One month

Wait there is more …. Step 3

Milk the cow Rollover Adjustment

Price Bullish Neutral Bearish

OTM rollout and/or up roll out roll out and down

ATM rollout and/or up roll out roll out and down

ITM rollout and/or up roll out roll out and down

or leave it

Step 3: Milking the cow or Adjustment

If correct – milk the cow

OTM – rollout (collect premium using contingency order)

ATM – rollout (rollup to collect premium and aim for capital gain)

ITM – rollout or up (avoid assignment)

If wrong – adjustment

OTM – rollout and down (collect more premium)

ATM – rollout and down (start to protect)

ITM – do nothing or rolldown (to protect further)

Comparison of PCP and Mod version

Alan’s P-C-P

1. Sell Put

2. When assigned then do

3. Sell ATM Call

4. When assigned repeat 1

Seon’s Modified version

1. Sell Put with adjustment or buy stocks when see price head north

2a. Sell ITM – Bearish

2b. Sell ATM – Neutral

2c. Sell OTM – Bullish

3a. Perform rollover when right

3b. Perform adjustment when wrong