Covered Call Success, Cash-Secured Put Failure: Critical Order Management Lessons

Introduction: Success and Failure in a Single Week

Not every week goes perfectly in options trading. Sometimes you win bigger than expected, and sometimes you miss opportunities entirely. This real-world trading experience demonstrates both outcomes and provides valuable lessons for option sellers managing multiple positions.

In this case study, we placed two orders on MRVL (Marvell Technology Inc.) during the same weekend: a covered call at a $40.50 strike and a cash-secured put at a $40 strike. One filled beautifully with better-than-expected premium. The other expired worthless before the market even opened.

The difference? Active order monitoring during the critical Monday morning hours when the market opens and price discovery occurs.

What Happened: The Tale of Two Orders

The Setup: Weekend Order Placement

On Sunday, January 22nd, two good-for-day orders were placed for MRVL:

• Covered Call: $40.50 strike with a $0.54 limit price (seeking $54 premium)
• Cash-Secured Put: $40.00 strike with a $0.74 limit price (seeking $74 premium)

The strategy was classic bilateral wheel trading: sell premium on both sides of the current stock price to maximize weekly income regardless of direction.

Monday Morning: Market Opens with a Gap

When the market opened Monday, January 23rd, MRVL experienced significant upward price action:

• The stock opened at $40.20, already above both strike prices
• The stock immediately began a strong rally throughout the day
• This created vastly different outcomes for the two orders

The Critical Mistake: Failing to Monitor Monday's Open

The mistake wasn't in the strategy—it was in the execution. Here's what went wrong:

What Should Have Happened

1. Monitor the market open (9:30 AM ET) to see where MRVL actually opened
2. Assess order status within the first 15-30 minutes of trading
3. Adjust the cash-secured put limit price based on actual market conditions
4. Potentially move the strike down to $39 or $39.50 with a more realistic premium
5. Collect some premium rather than letting the order expire worthless

What Actually Happened

The orders were placed Sunday evening and left unattended Monday morning. By the time the positions were checked later in the week, the cash-secured put had already expired, and the opportunity to adjust and collect any premium was completely lost.

Why Market Gaps Invalidate Weekend Orders

Weekend order placement is common among option sellers, but it comes with inherent risks:

1. Weekend News and Events

Between market close Friday and open Monday, numerous events can move stock prices:

• Company announcements or press releases
• Analyst upgrades or downgrades
• Sector-wide news (chip stocks, in MRVL's case)
• Broader market sentiment shifts
• Global economic news impacting U.S. markets

2. Opening Price Discovery

The Monday open reflects accumulated buying and selling pressure from the weekend:

• Pre-market trading establishes initial price direction
• Opening auction creates significant price movement
• Early trading volume confirms or rejects the opening level

3. Option Pricing Adjustments

When the underlying stock gaps significantly, option prices reprice instantly:

• Out-of-the-money puts lose value rapidly
• At-the-money or in-the-money calls gain premium
• Implied volatility may spike or collapse
• Your limit prices become instantly outdated

Recording the Successful Trade in MyATMM

Even when one position fails, the successful trades still need proper tracking. Here's how the covered call was recorded:

Transaction Details Entered

• Start Date: Monday, January 23, 2023 (execution date)
• Action: Sell to Open (STO)
• Type: Call
• Contracts: 1 (representing 100 shares)
• Expiration: Friday, January 27, 2023
• Strike Price: $40.50
• Premium Received: $87.00 (actual fill price)

Cost Basis Impact

Before recording the $87 premium:

• Total Premium Collected: $407.00
• Cost Basis with Premium: $36.43 per share

After recording the $87 premium:

• Total Premium Collected: $494.00
• Cost Basis with Premium: $35.56 per share
• Reduction: $0.87 per share

Best Practices for Weekend Order Management

To avoid missing opportunities like this cash-secured put, implement these order monitoring practices:

1. Set Monday Morning Alerts

• Create calendar reminders for 9:30 AM ET Monday opening bell
• Set price alerts on your broker platform for weekend positions
• Check pre-market price action (starting 8:00 AM ET)

2. Adjust Orders Within 30 Minutes of Open

• Review all weekend orders by 10:00 AM ET
• Cancel and replace orders that are clearly mispriced
• Adjust strike prices if the stock has moved significantly
• Accept smaller premiums rather than zero premium

3. Use Good-Til-Canceled (GTC) Orders Strategically

• GTC orders remain active beyond Monday, giving more time to fill
• However, they still require monitoring and adjustment
• Consider whether you want the position if it fills Wednesday vs. Monday

4. Accept Market Reality

Sometimes the market moves against your planned strategy:

• If the stock gaps up, cash-secured puts become less attractive
• If the stock gaps down, covered calls become harder to fill
• Adjust your expectations and targets based on actual market prices
• Focus on one side of the wheel if bilateral trading isn't viable

5. Track What You Planned vs. What You Got

MyATMM allows you to track all transactions, but you should also note:

• Orders that failed to fill and why
• Premium targets vs. actual premium received
• Lessons learned from missed opportunities
• Patterns in which orders fill and which don't

The Positive Outcome: Better-Than-Expected Premium

While the cash-secured put failure stings, the covered call success demonstrates the upside of limit orders in volatile markets:

How the Covered Call Exceeded Expectations

The covered call was set with a $0.54 limit, meaning "fill at $0.54 or better." When MRVL gapped up Monday morning:

• The $40.50 strike became at-the-money (stock opened at $40.20)
• Call buyers were willing to pay significantly more premium
• The order filled at $0.87, capturing the elevated premium
• This resulted in an extra $33 beyond the target

Tracking the Win Properly

Recording the actual $87 premium (not the planned $54) ensures:

• Accurate cost basis calculations
• True portfolio performance tracking
• Realistic expectations for future trades
• Proper tax documentation

What's Next: Monitoring the Covered Call Through Expiration

With the covered call sold at a $40.50 strike and MRVL trading above $40 at the open, several scenarios could play out by Friday's expiration:

Scenario 1: Stock Closes Above $40.50

• Shares get called away (assigned)
• Sell 100 shares at $40.50
• Realize the gain from cost basis to strike price
• Keep the $87 premium
• Start fresh with a new position or redeploy capital elsewhere

Scenario 2: Stock Closes Below $40.50

• Call expires worthless
• Keep the 100 shares and the $87 premium
• Sell another covered call the following week
• Continue lowering cost basis through premium collection

Scenario 3: Consider Rolling Before Expiration

If the stock moves significantly higher and early assignment risk emerges:

• Buy to close the $40.50 call
• Sell to open a higher strike call (e.g., $42.00)
• Collect additional premium through the roll
• Potentially avoid assignment and continue the position

How MyATMM Helps You Avoid Tracking Mistakes

While MyATMM can't monitor your broker's order book, it excels at helping you track what actually happens once orders fill:

Accurate Transaction Recording

• Record exact premium received (not just target premium)
• Track both successful and assigned positions
• See cost basis update in real-time as transactions are added
• Maintain complete history of all premium collected

Portfolio-Wide Visibility

• View all active positions across multiple tickers
• See which positions are generating the most premium
• Track cumulative returns from option selling strategies
• Quickly identify which stocks are working and which aren't

Proposed Cost Basis Tracking

MyATMM's proposed transaction feature helps you plan upcoming trades:

• Enter your planned covered call or cash-secured put before it fills
• See what your cost basis would become if the trade executes
• Make informed decisions about strike selection and premium targets
• Once the trade fills, convert the proposed transaction to actual

Risk Disclaimer

Options trading involves significant risk and is not suitable for all investors. The example trade discussed in this article is for educational purposes only and should not be considered financial advice. Good-for-day orders can expire unfilled, resulting in missed opportunities. Market gaps and volatility can cause substantial losses. Past performance does not guarantee future results. Always monitor your positions actively, especially during critical market hours like Monday morning openings. Consult with a qualified financial advisor before making any investment decisions. The author and MyATMM are not responsible for any trading losses incurred based on this content.

Conclusion: Learn, Adapt, and Keep Trading

This trading week with MRVL delivered both a valuable lesson and a pleasant surprise. The covered call filled at 61% higher premium than targeted, while the cash-secured put never had a chance due to the Monday morning gap.

The takeaway isn't to avoid weekend orders—it's to monitor them actively Monday morning. The first 30 minutes of trading are critical for assessing whether your orders still make sense given actual market conditions.

Even with the missed opportunity on the put side, the week still generated $87 in premium and reduced the cost basis by $0.87 per share. That's real progress toward the ultimate goal of owning shares for free through systematic premium collection.

Track every trade, learn from every outcome (good and bad), and continuously refine your approach. That's how option sellers build consistent, repeatable income streams over time.