New Insights on Covered Call Writing The Powerful Technique That Enhances Return and Lowers Risk in Stock Investing

ISBN-10: 1576601331

ISBN-13: 9781576601334

Edition: 2003

List price: $41.95 Buy it from $2.46
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Description:

For good reason, investors feel whiplashed by the markets of the past few years. They are looking for some sensible ways to bridge the gap between the consistency of fixed-return instruments and the upside potential of equities. New Insights on Covered Call Writing presents an investment approach that, although used by some traders for thirty years, is largely unknown or misunderstood by individual investors. This book shows how to use this powerful investment technique for success in today's and tomorrow's markets. Most of the professional texts on options devote no more than a cursory chapter to covered calls. Lehman and McMillan's ground-breaking book gives a complete guide to the increased control and lowered risk this technique offers active investors and traders, and will make covered call writing accessible to a broader range of the investing public.
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Book details

List price: $41.95
Copyright year: 2003
Publisher: John Wiley & Sons, Incorporated
Publication date: 5/1/2003
Binding: Hardcover
Pages: 256
Size: 6.50" wide x 9.75" long x 1.00" tall
Weight: 1.408
Language: English

Bennett A. McDowell is the founder of TradersCoach.comr and an expert in both technical analysis and complex trading platforms. As a financial advisor and broker, McDowell used his own proprietary trading system to serve a community of high-net-worth clients. This system later became known as Applied Reality Tradingr or ART, and today is used by traders and investors in more than forty countries around the world. McDowell lectures frequently and writes articles for many leading trading publications, including Technical Analysis of Stocks & Commodities magazine. He is a recognized leader in trading education and is honored to be a member of the eSignal "Trading with the Masters" team.

Acknowledgments
Preface
Introduction
Building the Foundation
Option Basics
What Are Options?
How Options Compare with Stock
Standardization
Listed versus Unlisted
Option Listings
Strike Price
Expiration
Players and Positions
Exercise and Assignment
The Basic Mechanics
What Happens at Expiration
Covered versus Naked
Options in Your Account
Recapping Option Basics
Just Beyond the Basics
Valuing Options
Fair, or Theoretical, Value
Volatility
Interest Rates
Dividends
Theory versus Reality
Trading Symbols
Adjustments
Expiration Months
How Options Are Traded
The Exchanges
Computerized Quotes
Liquidity
Recapping Just Beyond the Basics
Covered Writing Mechanics
Requirements for "Valid" Covered Writes
Risk/Reward of a Covered Write
Risk/Reward Characteristics Over Time
Risk Transference
Shorting a Call versus Shorting a Stock
More on Exercise and Assignment
Calculating Potential Returns
Return if Exercised (RIE)
Return Unchanged
Return Based on Net Debit
Executing the Strategy
Turning a Position into a Strategy
A New Way of Thinking
Follow-up Actions
The Simple Case: Doing Nothing until Expiration
Closing Part or All of the Position
Rolling Options
Rolling Up
Rolling Up and Out
Rolling Down
Rolling Out
Other Considerations
Covered Call Strategies
The Total Return, or "Buy-Write," Approach
The Incremental Approach
Hedging Individual Stocks
Reducing Risk in Small Portfolios
Writing Calls on "Hot" Stocks
Tax Deferral Strategies
The Benefits of Covered Writing
The Rationale Behind Covered Writing
Realistic Expectations
Call Writing and Stock Returns
Major Factors Affecting Call Writing Returns
Stock Selection
Strike Price
Expiration
Volatility
Interest Rates
Transaction Costs
Covered Writes Compared with Stocks Over Time
The Buy Write Index (BXM)
Real-World Results for Twenty Stocks
Results by Calendar Year
Effects of Writing a Higher Strike Price
Recapping Benefits
Intangible Benefits
What is Long Term, Anyway?
The Covered-Write Solution
The Benefits in Detail
Implementation
Deciding on Your Approach
Incremental Writing
Traps Involved in Writing for Incremental Return
The Total-Return Approach
Traps in the Total-Return Approach
Are You a Fundamentalist or a Technician?
Selecting Stock Positions
Searching All Stocks
Searching Specifically for Covered Writes
Selecting Calls to Write
Which Strike Price?
Which Expiration Month?
Getting Your Ducks in a Row with Your Brokerage
Full-Service versus Discount Brokers
Online Brokers
Financial Planners
Which Account to Use?
Writing Calls on Your Employer's Stock
Keeping Records
Placing Orders
Market and Limit Orders
Stop Orders
Buy-Write Orders
Using Spread Orders When Rolling
Risks
Basic Tax Rules for Options
Precepts for Covered Call Writers
Advanced Implementations
Covered Writing on Margin
Margin Rules for Covered Writes
Advantages of a Margined Covered Write
Covered Writing against Securities Other than Stock
Covered Writing on "Diamonds," "Qs," and Other ETFs
Writing Calls against Convertible Securities
Writing Calls against Other Options--The "Call-on-Call" Covered Write
Covered Writing on LEAPS
Partial Writing, Mixed Writing, and Ratio Writing
Partial Writing
Mixed Writing
Ratio Writing
Put Writing
Advantages of Put Writing
Disadvantages of Put Writing
Implied Volatility and Overvaluations
Efficiency, Inefficiency, and Overvaluation
Expiration Games
Option-Stock Arbitrage
Tools for Covered Writers
Option Chains
Search Tools
Calculators
Probability Analysis
Industrial Strength Option Software
What Will This Cost You?
Internet Resources for Covered Call Writers
Afterword
Timeline of Options Trading in the United States
Sample Covered Writing Spreadsheet for Tax Purposes
Tax Rules for "Qualified" Covered Call Options
Twenty-Stock Covered Call Study
Bibliography
Glossary
Index
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