Options Writing Strategies

The book, Options Writing Strategies for Extraordinary Returns is written by David Funk. The book is superbly written and is about call and put option writing techniques which can be used by investors so that they can make profits from the market irrespective of the direction the market is moving in. The book has options writing strategies for selling options short, tips to use charts and tables and then helps investors to buy stocks by building a three legged model.

Apart from these techniques there are some additional amazing features in this book for options writing strategies. The book also lists the option tools that are available online and also the step which the investors can take to take advantage of the volatility in the markets.

All the features in the book are very useful for all investors as it helps them to know of all the options writing strategies using which they are able to invest in a much better way and earn more profits of the market. The content of the book is written in a concise and clear way which makes it easy for everyone to read. The way it has been taught to make the strategies in the book is excellent and thus, provides benefits to all investors who read the book. The book helps the investors to deal with the stubborn situations of the market.

The investment strategies in the books are extremely sophisticated and as they are written in a simple and clear way, it can be understood by all very easily. The strategies reduce the risk that the investor faces in the market and thus, help them to increase their earnings from the market. Irrespective of the way the market swings, all investors can easily use the strategies and invest amicably and earn profits.

Option Trading Strategies For Long Term Investors

Option trading is typically associated with three different investor types. There are hedging strategies employed by large institutional investors, income-producing strategies for cash flow investors, and more aggressive trading strategies favored by speculators.

But where the does the long term investor fit in? Are there any option trading strategies that the conservative investor can employ to enhance his or her long term returns?

In fact, there are.

Leveraged Investing

There are actually a number of option trading strategies that can be employed by the long term investor. Leveraged Investing is the name I've given this approach, and these are the strategies I use myself.

The point of Leveraged Investing is to use options to acquire stock for a discount and then to generate additional returns above and beyond the actual performance of the stock itself.

Here are just two examples:

[Please note: in the interest of simplicity, commissions have been excluded from all examples.]

Example #1 - Writing Covered Calls. Writing covered calls is a popular, and generally conservative, income-producing strategy. A call option gives the holder the right, but not the obligation, to purchase 100 shares of the underlying stock at a certain price (strike price) by a certain date (expiration date).

Conversely, when you write, or sell, a call option on shares that you own, you sell (you receive a premium in the form of cash) someone else the right to purchase your stock at a certain price at or prior to the expiration date. If you own 100 shares of a stock trading at $28/share, you could write a $30 covered call expiring in one month. If the stock closes above $30/share, you'll be obligated to sell your shares for $30/share. But if the stock closes at or below $30/share, the call option will expire worthless and you're free to repeat the process. Either way, the premium received is yours to keep.

Writing covered calls is a great way to generate additional income from your investments, but the long term investor must take extra precautions to avoid being called out and forced to sell his or her long term holdings (I call one such precaution, The 1/3 Covered Call Writing Strategy--it basically consists of writing covered calls on only a portion of your portfolio in order to give yourself greater flexibility and protection against sharp moves higher by the stock).

Example #2 - Writing Puts to Acquire Stock at a Discount. A put option, in contrast, gives the holder the right, but not the obligation, to sell 100 shares of the underlying stock at a certain price by a certain date. When you write, or sell, a put, you're essentially insuring someone else's shares against a drop below the agreed upon strike price.

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