Writing Uncovered Put and Call Combinations by Paul D. Kadavy

This week's featured book on options trading:

Writing Uncovered Put and Call Combinations
by Paul D. Kadavy
Arrow Publications (July 2009)

From the publisher: This book provides a complete education and implementation program for investors who seek an opportunity to achieve double- and even triple-digit annualized investment returns utilizing a strategy of writing uncovered puts and calls on individual stocks and Exchange Traded Funds (ETFs) without owning them. Only one margin amount is required to write both the puts and the calls. It is designed for investors who have experience with covered call writing on individual stocks or ETFs, and preferably also with put option writing, and who are prepared to take greater risk to obtain greater returns. Ways to mitigate risk are also discussed at length in the book.

For the option investor, the simultaneous writing of a put and a call option on the same security can provide a two-fold steady stream of cash income utilizing the same margin requirement if structured properly. It can also provide a chance to purchase desired shares of stock at a lower than current market price, if that is the objective of the investor. This book will give you the theoretical and practical tools necessary to develop and implement this investment discipline. Software templates using Excel are also provided for selecting option alternatives and calculating returns on investment. There is also a file containing a wealth of data on all of the exploding number of current U.S. ETFs, including information about which offer put and call options for writing.

For investors who have time to watch the market, who have the comfort that comes from knowledge and experience with other option writing strategies, and fully understand and are prepared to take additional investment risk, writing uncovered put and call option combinations offers the opportunity for very high returns at a time when the overall long-term outlook for investment returns, both equity and fixed income, seems to be below their historical averages.

Show Me the Money: Covered Calls & Naked Puts for a Monthly Cash Income by Ronald Groenke

This week's featured book on options trading:

Show Me the Money: Covered Calls & Naked Puts for a Monthly Cash Income
by Ronald Groenke
Keller Publishing (January 2009)

From the publisher: Are you leaving cash on the table?

As an investor you have stocks in your portfolio. Those stocks, individually, will go up, down or remain about the same. Nothing really you can do about that. Market forces and corporate actions beyond your control will cause fluctuations in the value of your holdings.

But ... There is one important action you can take that will put cash in your brokerage account, today and month after month as time rolls by.

Selling Covered Calls and Naked Puts is a stock market strategy favored by many savvy investors. Here s how it works. Take one of your stocks, Stock ABC, which has a market price of $29. If you will agree to sell that stock (a Call option) for $30 on the third Friday of next month the market will pay you X amount of dollars today (the option premium). That s the money that you are currently leaving on the table. The premium X varies by stock and typically is two to three percent of the stock price.

Think about what can happen when you sell the option. Only one of two things will happen. If the stock price of ABC is above $30 on the third Friday you sell it for $30. That will happen about 30% of the time. The other possibility is that ABC is selling for $30 or less on the third Friday. In that case the option expires and you can sell another Call.

Either way the option premium Real Cash Money is in your brokerage account ready to be spent or reinvested. Continue the process month after month for a constant cash income from your portfolio.

The Naked Put strategy also gives you immediate cash. Using the same example with Stock ABC, which is in your portfolio and has a market price of $29, if you agree to buy additional shares at a discounted price of $27.50 on the third Friday of next month (a Put option) the market will pay you Y amount of dollars today (the option premium). If the stock price is above $27.50 on the third Friday the option expires and you can sell another Put, generating more cash income. If the price does dip below $27.50 then you buy the additional shares and can now sell more Covered Calls. The put premium Y varies by stock and typically is one to three percent of the stock price.

This book will give you the basic skills to master the art of selling Covered Calls and Naked Puts.

The Complete Guide to Option Selling by James Cordier and Michael Gross

This week's featured book on options trading:

The Complete Guide to Option Selling
by James Cordier and Michael Gross
McGraw-Hill (July 2009)

From the publisher: Option-writing strategies for high returns in every type of market.

Written in a style anyone can understand, The Complete Guide to Option Selling provides the strategies you need to consistently profit in a popular but poorly understood market.

This second edition contains all of the foundational information from the original edition and addresses recent changes in the market with brand-new material, including:

 • New chapters on volatility and portfolio building
 • Fresh insights into option spread trading in the “new” market environment
 • How volatile markets create the ideal conditions for selling premium—and how to profit when everybody else is running for the doors
 • New risk-management strategies for the 21st century, including how to manage the proverbial “Black Swan”.

Focusing on why, what, where, and how of writing options, The Complete Guide to Option Selling is a peerless guide for seamlessly integrating options into your own investment program.

The Options Trading Body of Knowledge: The Definitive Source for Information About the Options Industry by Michael C. Thomsett

This week's featured book on options trading:

The Options Trading Body of Knowledge: The Definitive Source for Information About the Options Industry
by Michael C. Thomsett
FT Press (August 2009)

From the publisher: For millions of traders and investors, options have become an indispensable tool: not just for increasing profits but also for systematically controlling risk. Now best-selling author Michael C. Thomsett has brought together all of today’s most important options strategies in a single authoritative reference. Using this readable, practical guidebook, you can select the right strategy for any application or market environment, clarify all your risks, and structure trades that accomplish your specific goals. Thomsett covers everything you need to know, from the core principles of options trading to the calculation of returns and taxes. He also provides a complete, easy-to-understand options glossary and extensive resources and links for traders at all levels of experience.

Options offer investors multiple opportunities to enhance their profits. However, options trading is complex, and the sheer scope of available strategies can overwhelm traders. Today, options can support a wide range of strategies, from high risk to conservative. Moreover, options are available not only for stock equities but also for futures, indices, and mutual funds. To trade successfully, traders need an authoritative, up-to-date guide to all the strategies available to them. Now, renowned options expert and best-selling author Michael C. Thomsett has created the definitive reference for options traders at all levels of experience.

Thomsett systematically illuminates each key technique and strategy: how trades are structured, how to assess risk, and when each strategy is most applicable. For most strategies, Thomsett presents detailed tables and illustrations identifying profit zones, loss zones, and breakeven points. This book thoroughly explains how option premium develops based on various elements of value, walks through the calculation of returns on options trading, discusses how federal taxation works in the options market, shows how stocks are picked for options trading, and provides a complete glossary and additional resources for traders.

Also available: The Options Trading Body of Knowledge (Kindle edition). Learn more about the Amazon Kindle, a wireless reading device.

Note: As of the date of this post, Amazon.com was offering the Kindle edition of this book for free!