Table of Contents

preface introduction part i: building the foundation chapter 1: 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 chapter 2: 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 chapter 3: 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 part ii: executing the strategy chapter 4: 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 chapter 5: 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 buywrite index (bxm) real-world results for twenty stocks results by calendar year effects of writing a higher strike price

About the Author

Richard Lehman has more than twenty-five years of experience applying his expertise in options strategies. He has held executive positions at E. F. Hutton, Thomson McKinnon Securities, First Saxonia Securities, and at the New York Stock Exchange. As an independent adviser, he now runs an online advisory service at CoveredWriter.com.

Lawrence G. McMillan is recognized as one of the foremost options trading experts. He has written three best-selling books on options, including Options as a Strategic Investment. As president of McMillan Analysis Corporation, he writes the "Daily Volume Alerts" and edits and publishes The Option Strategist, a derivative products newsletter covering equity, index, and futures options, as well as the online resource OptionStrategist.com.

Reviews

"This book makes a great case for basic reading and writing--reading stock charts and writing covered calls." ?John Murphy President, MurphyMorris Money Management Chief Technical Analyst, StockCharts.com "This was a definite eye-opener, and one of the soundest approaches to stock investing I?ve seen. It makes you wonder what else Wall Street has been keeping from us." ?Brian R. Workman Senior Vice President, Citi Cards, Citigroup "In a low-return, high-volatility environment, these strategies can boost returns and lower risk. There is no such thing as a free lunch, but in this case all the lunch costs is a little initiative." ?Stephen M. Savage Managing Director, Litman/Gregory Analytics "This book has the most complete and comprehensive coverage of covered call investing that I have seen. Most books discuss covered calls as just one of many option techniques. This book goes the extra mile. It discusses the theoretical aspects of covered calls and also provides the practical tools any investor would need to effectively implement a covered call trading strategy." ?Ernie Zerenner President, Power Financial Group, Inc.