Why Option-Sellers are Positioned to Beat the Market on a Consistent Basis
Covered call writers and sellers of cash-secured puts are implementing low-risk option strategies which creates the potential to outperform the market routinely. Why is that? The answer is that when we sell options, we are lowering our cost-basis or breakeven prices. Every strategy has its pros & cons, but this is one of the most important advantages of these strategies and one of the main reasons I was attracted to them. In this article, a real-life example with Arista Networks Inc. (NYSE: ANET) will be analyzed to demonstrate the mathematics of this benefit using cash-secured puts.
Get Dr. Alan Ellman, President of BCI’s stories in your inbox
Join Medium for free to get updates from this writer.
Real-life example with ANET
- 8/12/2026: Buy 200 x ANET at $208.54
- 8/12/2026: STO 1 x 9/18/2026 $195 put at $$7.72
- 8/12/2026: STO 1 x 9/18/2026 $185 put at $4.70
- 8/12/2026: ANET has been on the BCI Weekly Stock Screen & Watch List for 11 weeks
- 8/12/2026: ANET has appreciated in value 56% year-to-date
- OTM puts were used to lower cost-basis and generate significant option premium returns
Initial put calculations using the BCI Trade Management Calculator (TMC)
- Red circle: These are 38-day trades
- Brown cells: Initial 38-day returns ranged from 2.61%, 25.04% annualized to 4.12%, 39.59% annualized
- Pink cells: Total $ return for the 2 contracts was $1242
- Purple cells: If shares are “put” to us as a result of price decline to below the OTM put strikes, the purchase discounts range from 10.19% to 13.54%. This also represents how much breakeven is lowered
- Yellow cells: These are the new breakeven prices or cost bases; $180.30 and $187.28 from the current $208.54
Discussion
When trades are structured properly and the strategy skillsets (stock selection, option selection and position management) are mastered, option sellers are well positioned to beat the market on a consistent basis, something I have been enjoying now for 3 decades, and I wish the same for the entire Medium & BCI communities.
