Option Writing Strategies for Extraordinary Returns

Option Writing Strategies for Extraordinary Returns
Average customer rating:

This book can boost your financial health. It boosted mine!

Writing Options for a Third Source of Income

This book is a serious DANGER to your financial health

One of the "Year's Top Investment Books"

Informative, well-documented, author shows actual investment results

Option Writing Strategies for Extraordinary Returns
David Funk
Manufacturer: McGraw-Hill
ProductGroup: Book
Binding: Hardcover

General | Popular Economics | Business & Investing | Subjects | Books
General | Business & Investing | Subjects | Books
Futures | Investing | Business & Investing | Subjects | Books
General | Investing | Business & Investing | Subjects | Books
Options | Investing | Business & Investing | Subjects | Books
Stocks | Investing | Business & Investing | Subjects | Books
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Put Options : How to Use This Powerful Financial Tool for Profit & Protection

ASIN: 0071448837

Book Description

Option Writing Strategies for Extraordinary Returns details put and call writing techniques sophisticated investors can use to profit from market movement in any direction. It first outlines a strategy for selling options short, using tables and charts to illustrate each step, and then builds a three-legged model for using popular options tools when purchasing stocks. Additional features include techniques for extending a position or writing “up” a position, a valuable listing of available online option tools, and steps for taking advantage of market volatility.

Customer Reviews:

This book can boost your financial health. It boosted mine!.......2007-09-23

I have 15 years of experience with options trading. For the past 2 years I have invested in accordance with the strategies described in this book - and have benefited as much as the author did in his verified account statement published in the book.

This book is not about options strategies. It is about investment strategies - very successful ones. It uses covered option writing of both puts and calls to generate a third source of income from common stock holdings. The strategies provide me with the opportunity to partially hedge my stock portfolio as a way of offsetting the extreme volatility that characterizes recent stock market trading. The third source of income - premium income from writing options - is a significant addition to the first two sources of income from common stock, dividend income and capital appreciation, both of which currently have special tax advantages.

As an example,
- On August 16, 2007, I bought 1,000 shares of TE at 15.01.
- On the same day, I "sold to open" 10 TE Jan 2009 17.5 calls at 1.00.
- On September 4, 2007, I "sold to open" 10 TE Jan 2009 15 puts at 1.25.

The annual dividend from this NYSE-traded utility stock is 78 cents, or 19.5 cents per quarter. To calculate the return (not counting any price change) from the 3-legged position over the 17 months until option expiration, first add together five dividends of 19.5 cents, or 98 cents per share. Then add 1.00 from writing a call, and 1.25 from writing a put; that's a 3.23 return on a 15.01 investment - giving me 21.5% on my total investment over the 17-month period - which works out to be an annual rate of return of 15.1%.

Of course, the options may be bought back, written up, or exercised before Jan. 2009, and the stock price may go up or down. In any case, the investment strategies described in this book serve me very well.

The author of this book has put in place three "guidelines" that reduce risks associated with writing covered LEAPS.

Guideline 1: On the upside, the investor is encouraged to write only that number of calls covered by the underlying shares of common stock (for example, 1,000 shares of stock allow the writing of ten covered call contracts).

On the stock market downside, guidelines 2 and 3 are employed

Guideline 2: Puts written should be 100% cash-collateralized so that funds are present to purchase any shares actually assigned.

Guideline 3: A mental loss limit of 2% of a portfolio's value is recommended. A "portfolio" should have at least ten different holdings at any time. The portfolio's value is the sum of the values of the three legs for each of the ten or more investment positions. For example, if a portfolio value is $50,000, then any position (consisting of long stock, short puts, and short calls) that is down more than $1,000 should be closed and replaced with another position When any of my net positions are down more than the loss limit, I close the position and move sideways into a comparable stock. In this way, as stated in the book, I benefit from realizing a loss for tax purposes while maintaining the same (approximate) relative financial position.

These investment strategies have helped me traverse the wide swings in the stock market while still earning an attractive yield.

Writing Options for a Third Source of Income.......2006-03-30

I am an investor with 10 years of experience with writing options. I am very pleased with the conservative approach presented in this book.

Of course there are other capital appreciation strategies and other income-generating strategies, but this book's strategy of the three-legged position (buy the stock, write the cash-collateralized put, and write the covered call) provides an excellent balance between risk and reward.

The author stresses the importance of fully collateralizing the put, with either cash or near-cash investments such as tax-qualified preferred stock. Naked puts are never recommended. Writing covered calls and cash-collateralized puts are the key to safer long-term investing.

The relevant comparison for me is how the three-legged strategy with fully collateralized puts and 100% covered calls (all LEAPS) compares with the standard investment strategy of either buying to hold a stock, or attempting to "time the market" by buying, selling, or selling short a given stock. I am convinced, through my experience with the three-legged strategy, that it is the best approach.

The fact that an extremely large number of options expire worthless (about 85% of them) provides fertile field for the investment strategy of writing options for a third source of income. I can reap the rewards from the option expiration when it occurs, or, prior to expiration, I can re-write the option at a different strike price or different expiration date, or simply buy it back.

I strongly recommend this book for long-term investors seeking additional investment tools with an acceptable risk level.

This book is a serious DANGER to your financial health.......2006-02-12

I am an option trader with 3 years of trading experience, and I am thoroughly alarmed after reading this book.

Here are my criticisms:

1. Lack of Clarity
Two problems here: name, and explanation of the strategy. Mr Funk insists to call his recommended strategy "the three-legged position". OK, everyone is entitled to create their own pet names, but it would have been useful to tell the reader what the rest of the market calls this strategy - it is "Covered Strangle Writing" or "Covered Short Strangle".

More serious than Mr Funk's refusal to come clean about the name of his recommended strategy, is his failure to explain the WHYs of this strategy. Now the common use of Covered Short Strangle is to generate income, and this is discussed at some length in the book. However, there is no discussion about the relative merits of this strategy compared to other income-generating option strategies, such as Covered Call.

More dishearteningly, Mr Funk creates a twist in the standard Covered Short Strangle to devise a capital-appreciation strategy. Would a traditionally income-generating strategy be effective as a capital-appreciation strategy ? How does it compare to other capital-appreciation option strategies ? No discussion. Why does he recommend the sale of deep-in-the-money put options ? No explanation.

In short, we get good clear details of the mechanics of his recommended strategy, but zero explanation as to WHY he recommends each part of this strategy.

2. Fuzzy discussion of RISKS
No where in this book can we find a risk chart that shows clearly at what price ranges will this strategy make or lose money, and by how much. You need to read the book very carefully to deduce (yes, deduce - because Mr Funk does not spell it out clearly) that it will make money when the stock price moves strongly upwards.

Furthermore, Mr Funk only glancingly discuss risk management. What to do if the stock price moves down instead .. ? Well, don't forget to set your stop-loss at 20%. That is it. There isn't even any explanation whether the stop loss should be applied to all three positions (the stock, the short put and the short call options), or just the stock.

So, the blurb in the front cover "Benefit from both up and down markets" is misleading. This strategy will hurt on the way down, and for the capital-appreciation variation (with deep in the money short put) it will hurt when the stock price is moving sideway too!!

3. Zero discussion on the strategy's disadvantages
Reading through this book, you will think that this strategy has no weakness at all. Let's refer to what other leading option experts have to say about it:

"Very high risk and capped reward. Not recommended." (Guy Cohen, "The Bible of Options Strategies", 2005, p. 305) He goes on to say that while this strategy generates better yield compared to Covered Call, it is also substantially riskier, "the position can become loss-making at approximately double the speed as a simple Covered Call position" (p. 52).

"So a covered strangle - which is a covered write and a naked put - is equivalent to selling two naked puts. Therefore, it would be more efficient to just sell two naked puts rather than bother with the covered strangle write." (Lawrence G. McMillan, "McMillan on Options", 2004, pp 76-77) He goes on to say that simply selling two naked puts will bring lower collateral requirements, lower commision costs and avoid having to deal with three bid-asked spreads.

Every option strategy has a weakness; so this book's silence on this very important subject makes it a serious DANGER to your financial health.

One of the "Year's Top Investment Books".......2005-11-20

I got interested in this book after seeing it listed as one of the "YEAR'S TOP INVESTMENT BOOKS" in the STOCK TRADER'S ALMANAC 2006. The description said that "conservative investors who are delighted to make 10% to 15% annually, year after year, should buy this book." I am a conservative investor with an objective in that range.

Not only does the book give me step-by-step directions for achieving my goal, by writing puts and calls for the stocks I purchase, but also it provides the actual, verified results obtained by the book's author. That convinced me. I am now taking advantage of the three sources of income - capital gains, dividends, and option premium income - while feeling comfortable that I will benefit from my investments no matter what the stock market does. That's a good feeling for a conservative investor.

Informative, well-documented, author shows actual investment results.......2005-09-27

This is a great book for stock market investors to follow. The strategies are sound and well-explained. I'm impressed with the success of the three-legged position. Prior to writing the book, the author opened an online discount brokerage account and set up a portfolio based on the Income Model described in the book. Included in the book are his verified brokerage firm statements for the first year. His one-year results are impressive - a gain of 15.1% in a 12-month period when the S&P 100 gained 8.0%. I'd be happy to have an annual 15.1% gain on my stock market investments!

From reading the book, I now understand the importance of writing puts as well as covered calls. Covered calls are useful when a stock price falls - and if exercised, offer a way to sell stock above the current market price. The short puts are useful when a stock price rises - and if exercised, offer a way to buy the stock below the market price. I like being able to benefit from stock price movements in either direction.

I would love to have someone follow up with a monthly service that tells investors which stocks to use for establishing three-legged positions and which existing positions to write-up or close. Lacking that, I'll make my own investment decisions and hope to do as well as the author has done. The book certainly provides an excellent blueprint for making such decisions.

Book Description

My intent with this book is to help investors succeed. This book outlines a strategy for equity investing. This book is not a guide on how to set your financial goals or how much money you will need at retirement. This book presents a simple and reliable investment strategy that will outperform 90% of all growth funds over time with less risk. The strategy is designed to preserve your hard-earned cash, and to share in the potential from investing in sector mutual funds. This sector strategy has helped thousands in reaching their financial goals.

Customer Reviews:

One Star is one too many.......2006-11-05

A Google search of Schield Management reveals all you need to know about the author's expertise - in crime. Using hindsight analysis, a sector fund timing system described in the book was invented and then peddled to gullible investors who believed they would get similar above average results. Inevitably these systems fail which led Schield to lie to clients about their performance and to SEC investigators who were forced to go to extraordinary lengths to expose his fraud. (See SEC Release No. 284 5/24/05 and No. 53201 1/31/6). Thankfully his firm was shut down and Schield permanently barred from acting as an investment advisor or broker-dealer in the future. Buy this book and you join me on his sucker list.

Very easy read with lots of general advice........1999-06-24

This book was a very easy read. It was written for anyone starting or considering sector investing. I will use alot of the general advice in developing my strategies. While some of the examples are several years old, all of the concepts and stratgies still apply.

Great read for anyone familiar/curious about sector investng.......1998-03-06

This book is one of the best sources for sector rotation and investing out to date. It is written and organized well with explanations that the investment professional or layman can easily understand. Good charts and easy to understand graphs with occasional humor. I read the entire book over a weekend. I have been doing my own sector plays for years and even I learned some things. I also checked out the books website, which is very professionally done.

Book Description

For buyers of a business or anyone involved in any phase of the due diligence process, Gordon Bing provides a unique, comprehensive, one-volume source of information and guidance. His book will help investors research, evaluate, and understand an existing or proposed business not only from a financial standpoint, but also from equally important nonfinancial standpoints. It provides a full explanation of the due diligence process, including systematic methods to determine the information you need, why you need it, and how to get it. Keyed to each topic, chapter by chapter, is a full list of specific questions that should be asked during due diligence proceedings to be studied beforehand and carried with you as a valuable on-the-spot reference. A unique, practical resource for professionals and a hands-on text for students in business schools and upper division undergraduate courses in mergers and acquisitions. Chapters 1 and 2 discuss how to plan, organize, and conduct due diligence. In Chapter 3, Bing shows how to construct a list of the information and documents you will need. Chapter 4, by M&A attorneys James W. Ryan and Robert C. Beasley, deals with the legal aspects, responsibilities, and perils of performing or failing to perform due diligence. From there the book focuses on specific areas of due diligence inquiry--including management, marketing, human resource and other important functions--and helps you develop your own tailor-made investigation best suited to the company you are studying. The book concludes with a unique checklist of all the questions explained earlier--a manual you can study beforehand and then carry with you into meetings "on site."

Customer Reviews:

Very comprehensive.......2000-10-25

The book uncovers a huge amount of detailed questions, nedded to perform a solid due dilligence. Very good for inspiration before investigating.

An excellent guide to truly understanding the numbers.......1998-11-07

As someone who works in investment banking, I can say this book is applicable to much more than just due diligence. It can help an analyst through most financial analysis situations(assuming the user knows the basics of how to use and analyze financial statements). What's best about the book is that it goes beyond the theory and academic stuff and gets down to real "how-to's" and "why's". He goes through every account that would appear on the three major financial statements and explains what to look for in them, how to find the answer if it's not readily apparent, what questions to ask and why the questions are important. He also thoroughly examines off-balance sheet, off-income statement and qualitative items that are essential to analysis. Beware, there are no numbers or examples to work through in this book. This book is quite literally one man's experience and intuition put into written form. If you understand that financial analysis is not as cut-and-dry as looking at well-prepared, fully forthcoming financial statements with all the info you need already given, then this book is just what you are looking for. It helps you get the right numbers to which you can apply meaningful financial analysis.

Due Diligence for Global Deal Making: The Definitive Guide to Cross-Border Mergers and Acquisitions (M&A), Joint Ventures, Financings, and Strategic Alliances

Average customer rating:

A Remarkable Accomplishment
Packed with Knowledge!
Do Better Deals by Doing Better Due Diligence

Due Diligence for Global Deal Making: The Definitive Guide to Cross-Border Mergers and Acquisitions (M&A), Joint Ventures, Financings, and Strategic Alliances

Manufacturer: Bloomberg Press
ProductGroup: Book
Binding: Hardcover

Exports & Imports | Economics | Business & Investing | Subjects | Books

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ASIN: 1576600920

Book Description

This new book is an invaluable guidebook for companies trying to capitalize on the opportunities in both developed and emerging cross-border markets. Noted experts discuss critical topics corporate executives--and all those involved with their company's legal, accounting, and tax matters--need to know to successfully complete complex, global transactions.

Customer Reviews:

A Remarkable Accomplishment.......2003-03-05

Due Diligence for Global Deal Making is one of the most enlightening and comprehensive books of its kind. Editor and contributor Arthur Rosenbloom has identified a group of thoughtful, experienced due diligence practitioners who describe the process from seven different points of view. The process is covered both from an in-bound and an out-bound standpoint. Despite the diversity of perspectives, the book maintains a consistent style and voice and refrains from undue repetition.

Each of the seven substantive chapters looks at a business using a slightly different lens: strategic, operational, financial and accounting, legal, tax, organizational and, oddly but perhaps most interestingly, the Internet. Scattered through the chapter are cautionary tales of what can go wrong in the real world if the practitioner or the client cuts corners. At the end of each chapter is a series of charts and lists which sets forth the subjects of investigation, often with indications of where to find the information or how it is important to the evaluation of the target.

For anyone who has to conduct, supervise or coordinate due diligence, this overview is remarkably helpful. For the young attorney, accountant or business strategist, Due Diligence provides a veritable Bible for his or her own due diligence. But more importantly, the book informs the reader how the information gleaned fits into the overall process.

Rosenbloom's brief but enlightening look at the due diligence world post 9/11 is among the most compelling parts of the book. This section alone can be worth the price of the book. The possible effects of terrorism or war on a business, in concrete terms, or on the material adverse change or force majeure clauses of a contract are sobering and helpful.

Describing due diligence from seven points of view and then domestic and foreign aspects on top of that is a tall order. This informative book is a remarkable, and even entertaining accomplishment...

Packed with Knowledge!.......2003-02-26

As with marriage, the success rate for global deal-making should give the wise investor pause. Most such mergers and acquisitions do not increase shareholder value. Even with the fallout from the burst bubble still landing all over the place, the juggernaut of globalization is such that international deals still manage to engender a lot of passion; it seems the grass is always greener on the other side of the border. Business leaders know that sometimes the riskiest move is the one they decide not to make, since a good strategic acquisition can ensure your company's survival. For these reasons, interest in cross-border transactions will probably remain strong, as industries consolidate and as global economic barriers collapse. However, deals that involve foreign accounting and legal practices can be absolutely perilous without expert professional guidance. This clearly written, thorough compilation can help you avoid making a bad decision and improve your odds of success. We from getAbstract strongly recommend it to anyone involved in (or considering getting involved in) global deal making.

Do Better Deals by Doing Better Due Diligence.......2002-11-06

Doing mergers and acquisitons that create value for shareholders is harder than ever. It is even more difficult to do this in a multi-national environment. The compelxities of tax, accounting, securities laws and the regulatory differences add enormous complexities to the already huge challenges of just getting the stragegy right and executing it!!

This handbook, Due Dilignece for Global Deal Making, dramatically increases the odds of doing a deal better. Many experts believe that deals are made or broken in the due diligence phase. That is is where you figure out how much to pay, and the valuation is totally dependent on what you find out and what questions you ask.

This book covers it all from strategic imperative to tax rules. It also has an excellent chapter on my own area of expertise, people and organizational fit. I found the section on beginning to evaluate the fit of the corporate cultures particularly helpful. We think the success of true mergers are highly influenced by the cultural fit.

I would highly recommend this book to anyone practicing in this area, regardless of their area of expertise, as it gives them context for all of the other important, areas.

Enviromental Due Diligence: A Professional Handbook
Average customer rating:

Environmental Due Diligence: A Professional Handbook

Enviromental Due Diligence: A Professional Handbook
Kenneth S. Tramm
Manufacturer: Infinity Publishing
ProductGroup: Book
Binding: Paperback

General | Earth Sciences | Science | Subjects | Books
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ASIN: 0741433982

Product Description

This is a resource for professionals on all sides of Environmental Due Diligence. Its practical handbook with examples to assist in gaining knowledge and skills needed to perform/review an assessment.

Customer Reviews:

Environmental Due Diligence: A Professional Handbook.......2006-10-31

Environmental Due Diligence: A Professional Handbook is the best book of its kind and strikes the right balance between between being thorough and being concise. With the implementation of the EPA's All Appropriate Inquiry (AAI) rule this book should become an essential resource for anyone involved in environmental transactional due diligence.

Average customer rating:

Due Diligence Handbook (Two Volumes)
William M. Crilly
Manufacturer: AMACOM/American Management Association
ProductGroup: Book
Binding: Ring-bound

Consolidation & Merger | Management & Leadership | Business & Investing | Subjects | Books

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Professional | Qualifying Textbooks - Fall 2007 | Stores | Books

Reference | Qualifying Textbooks - Fall 2007 | Stores | Books
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ASIN: 0814404073

Book Description

DUE DILIGENCE HANDBOOK

This is the most complete guide available on how to properly perform a due diligence investigation -- and radically improve the success rate of a pending corporate merger or acquisition.

And it's not just a simple checklist of steps to follow. This comprehensive tool includes 500 pre-formatted forms for recording and analyzing every possible operational and financial activity, as well as clues of what to look for and what to look out for. The looseleaf format makes it easy to photocopy and distribute pertinent information and forms to all members of the due-diligence team.

WILLIAM M. CRILLY (Aliso Viejo, CA) is the chairman and founder of Newport Pacific Associates, a firm that assists companies in arranging mergers and acquisitions.

Conducting Due Diligence, 1995 (Corporate Law and Practice Course Handbook Series)
Average customer rating:
Conducting Due Diligence, 1995 (Corporate Law and Practice Course Handbook Series)
Frank M. Macioce , Vasiliki B. Tsaganos , and Practising Law Institute
Manufacturer: Practising Law Institute
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Due Diligence: Planning, Questions, Issues
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Due Diligence: Planning, Questions, Issues
Gordon Bing
Manufacturer: Praeger Publishers
ProductGroup: Book
Binding: Hardcover

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Book Description

People often fall in love with a business--just as they fall in love with a house--and forget to use their heads as well as their hearts to assess the property. Asking the right question at the right time can save potential buyers a bundle of money or help them avoid making a major mistake. In this completely revised edition of Due Diligence Techniques and Analysis, published in 1996, Bing breaks down the due-diligence process in detail and shows readers how to investigate, step-by-step, a business with an eye to buying or investing in it. In addition, the author identifies the techniques to employ, the questions to ask, the documents to review, and the issues to explore to reach intelligent conclusions about an acquisition. In a 30-year practice as a deal maker representing buyers and sellers, Bing knows where the bones are buried in many deals, providing invaluable insights and expert opinion readers can use to arm themselves when faced with a tough buying decision. Fifty chapters cover the different aspects of a typical business up for sale, such as ownership, management, marketing, accounting, environmental issues, and culture. The questions and topics discussed in each are preceded by commentary that highlights major areas for study, objectives, and common problems. In this book, you will find: --The most comprehensive, powerful, up-to-date set of due-diligence questions ever assembled. --Invaluable insights for those contemplating buying or investing in a business, new executives who need to get up to speed on a company or division, anyone conducting forensic investigations, and financiers wondering whether it's time to lend more or pull the plug. Most acquisitions that fail can be traced to failures of due diligence. This book will enable buyers to avoid problems and spot opportunities quickly, making business success much more likely.

Conducting due diligence, 1996 (Corporate law and practice course handbook series)

Average customer rating:

Conducting due diligence, 1996 (Corporate law and practice course handbook series)

Manufacturer: Practicing Law Institute
ProductGroup: Book
Binding: Unknown Binding
ASIN: 0872242471

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Environmental Due Diligence Handbook

Manufacturer: Government Inst
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Binding: Paperback

Environmental & Natural Resources Law | Law | Subjects | Books

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ASIN: 0865872457

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Manufacturer: Government Institutes
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Binding: Unknown Binding

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