Blue Collar Investor Membership Review – The Next Trade

It’s been a stretch since I last wrote about the BCI Membership and how that system is or isn’t working for me, so I figured I get caught up on it!

If you’ve read my October Options Income Report you know I’ve continued trading Trinity Industries (TRN) and it’s…going. I won’t say it’s going well or bad, it’s just going!

In light of the fact a majority of my funds are tied up in CLF or TRN I decided to continue to test out BCI in my virtual account on Options House. So, without further ado, let’s get into the trades!

Picking winners

This time around, after opening the Nov 7, 2014 Weekly Stock Screener I went straight to the bottom of the screener. I didn’t really mess around with the top of the screener this time because the real suggestions/results of the screen are at the bottom.

I varied my selection criteria very slightly from last time and allowed for non-dividend paying stocks and non-top tier performers to enter into my equation.

If you’re using Options House as your trading platform, like I am, there’s a lot more freedom on the stocks you can pick when paper trading because you can increase your account balance with a few clicks!

I wish it was that easy in the real world!

My choices this time around were AmTrust Financial Services (AFSI) and Integrated Device Technology (IDTI).

This time around I paid a little more attention to the technical, as suggested by Alan and the Blue Collar Investor Team and it paid off. Below are TradingView.com screenshots of the technical at the time I was looking at them. The big green line denotes the day I entered into the trade.

 

AFSI Technicals

AFSI Technicals


IDTI Technicals

IDTI Technicals

The technical weren’t shining on either of the stocks, but they weren’t trending down at the time I looked at them. So, with that and my paper money in hand I made the trade!

Picking the strike

This time around, since I wasn’t using “real” money, I played it a little more aggressively and picked an out-of-the-money (OTM) strike for IDTI and an in-the-money (ITM) strike for AFSI.

Below is a screenshot of the calculator the Blue Collar Investor provides to help you decide which strike to pick.

AFSI & IDTI BCI Calculator ReturnsAFSI & IDTI BCI Calculator Returns

AFSI & IDTI BCI Calculator Returns

As you can see, I took a look at a few more stocks beyond IDTI and AFSI, but settled in on those two.

With IDTI, I picked the $19 strike which had a return on option (ROO) of 1.1% and an upside potential of 4.9%. This means my max return on the trade could be 6%…not bad for a month!

The $18 strike really didn’t provide much downside protection and I really wanted to see if I could tap into some of the upside potential of the $19 strike. The 2.4% ROO with the $18 strike was tempting but when I considered that was my MAX return, I figured “why not” and swung for the fences!

With AFSI, I chose a strike which was slightly ITM at $50 which gave me a ROO of 3.2% and downside protection of 1.1%. The ATM strike of $50.50 really provided negligible additional return and much less downside protection, so for me it was a no brainer.

So, with all that said and done let’s take a look at the results!

Winner, winner, chicken dinner!

I won’t beat around the bush, both trades came out winners!

Here’s how the numbers worked out. Of note, the percent return is based off the initial investment.

Underlying Option Entry Price Exit Price Commission $ Gain/Loss % Gain/Loss # Contracts/shares
IDTI Nov 14 19 Call $0.20 Expired $5 $15.00 75% 1
IDTI-stock $18.24 $18.56 $7.90 $24.10 1% 100
AFSI Nov 14 50 Call $1.85 Called away $5 $180 97% 1
AFSI-stock $50.85 $51.98 $7.90 $105.10 2% 100

 

In total, I made $324.20 on the two trades or 4.6% on the total $6,909 to purchase the underlying stock. Not too bad if you repeat for 12 months. That would annualize to 56.3% or so…not too bad!

I sold the IDTI stock when the call expired, however I could have just as easily resold another option on the shares I was holding.

Wrapping it all up

All in all I’d say this is another win for the BCI screener. When you consider an annual subscription to the Blue Collar Investor Weekly Stock Screener costs $600, when paid monthly, you would only need two months like this to cover the cost.

Of course if you were playing with a much larger account size, it would be even easier to quickly cover the costs. Smaller accounts, such as mine, will have a little more difficulty covering the costs.

However, even if you subtract two months’ worth of returns you still come out much more ahead than you probably would otherwise. And this says nothing about the time you save using the screener instead of researching the info yourself.

Stock screens can be a tricky lot with wide variances of cost. As Eric, one of our readers, mentioned in an email to me, he’s seen screeners up to $1,500/year. It can be tough to decide which screen is really worth the money you put into it, or if you should really just go at it on your own.

Let me know what you think about my results with the BCI screen by leaving a comment below or if you’re already using BCI let me know how it’s going!

Until next time, happy trading!

Join the discussion 3 Comments

  • Gary K. says:

    Patrick,
    Have a look at RadioActiveTrading.com

    Be careful with Covered Calls as your sole strategy. This market is very volatile and you may want to add some protection…just a suggestion.

    • Patrick says:

      Gary,

      I agree covered calls shouldn’t be my only strategy and it definitely won’t be! In the next week or so I’ll release my trading plan for 2015 and I would greatly appreciate your thoughts when you read through it!

      -Patrick

  • Anna Miller says:

    Gary, I gotta tell ya that I know Alan Ellman’s (The Blue Collar Investor) primary strategy is covered call writing. He also sells cash-secured puts. He has been doing this for nearly 20 years and has consistent wins even when the overall market falls. I trust him implicitly and would recommend you check out his website or Youtube videos. He has over 100 videos in his Ask Alan series. Who knows, you may just become a convert. 😉 Best of success to you.

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