Covered Calls And Naked Puts: Create Your Own Stock Options Money Tree - Softcover

Groenke, Ronald

Softcover

ISBN 10: 0967412897 ISBN 13: 9780967412894

Publisher: Keller Pub, 2007

Synopsis

"Covered Calls and Naked Puts" is the second book by Ronald Groenke on the subject of making money by selling options. His first book was "The Money Tree: Risk Free Options Trading". A third book now available is "Cash for Life". All three books are written in novel format. The main character, Rob Graham, is a retired finance professor. He meets a former student on Marco Island, Florida and begins revealing his secrets about selling covered calls and naked puts. The reader learns along with the student how to select the right stocks in building a sound portfolio and then the best calls and puts to sell for a monthly income.

About this title

From the Publisher

"Covered Calls and Naked Puts" by Ronald Groenke. Finally a book unlocking the power of both Calls and Puts in an interesting novel format. One of the main characters, Jake Kimball, is getting desperate. Having retired to Marco Island, Florida with wife, Katie, he watches current expenses eat into the value of his portfolio as the market remains stagnant. What to do?

Coming to the rescue is a chance meeting with his college finance professor from 30 years back. Professor Rob Graham has also retired to Marco Island and is doing surprisingly well for a retired teacher. Jake is impressed with the professor’s expensive auto and beach front penthouse condo. He must learn the secret.

As the two renew friendships, the professor reveals a few secrets each week. In the first lesson Jake learns the meaning of "covered calls". While owning stock is certainly not risk free and the options market in general is considered a big gamble, there is one type of options trade that is risk free. It is called a covered call and is even allowed in retirement accounts. To do a covered call you must own 100 shares of a stock on which calls can be bought and sold.

For example consider 100 shares of Wal-Mart which has recently been trading for about $54.00. When you acquire the 100 shares you take the risk associated with owning stock. It can go down! The risk free transaction is to sell on the market the right for someone to buy your 100 shares for, say, $55.00 (the strike price) anytime up to some future date (the expiration date). The lower the strike price and the later the expiration date the higher the cash payment (premium) you receive. The volatility of the stock also affects the premium. The author explains how to decide which premium to select and provides software tools to easily evaluate and sort the data.

The cash you receive for selling a covered call goes into your brokerage account immediately and is yours regardless of what happens next. What can happen? Actually only one of two events. Again with Wal-Mart, if the price on the expiration date is $55.00 or less the option expires and you can do it again. Sell another covered call on the 100 shares and pocket the money. The other possibility is that the price of Wal-Mart will be above $55.00 on the expiration date and your stock will be bought for $55.00, the strike price. Now you have the cash from the stock sale plus the premium for the call to reinvest in another stock and do another covered call.

Covered calls are only the beginning. The professor next explains his "naked puts" strategy, with guidelines on selecting appropriate stocks on which to sell a put and the acceptable put premium, again with software facilitating the process. Like with calls, the put premium goes immediately into your brokerage account. And again one of two events will happen. Either the option will expire (and you can sell it again) or you will buy the stock at a discount (be put the stock at the strike price). If the later happens you are now positioned to sell a covered call on your new acquisition.

Underlying both strategies is a basic primer on stock selection which is well worth the price of the book even if you don’t get into selling options. The software made available in the book features a search engine for updating stock and option data based on your criteria.

As you might predict the novel ends on a happy note. Jake becomes his own financial advisor, takes charge of his portfolio and creates a steady stream of income from selling covered calls and naked puts. With this book, you can too.

From the Inside Flap

Ronald Groenke has written a gem of a book that is ideal for conservative investors looking for low-risk opportunities in the options market. By the time investors are finished absorbing the information contained in "Covered Calls and Naked Puts", they will feel comfortable embarking on the strategies discussed, with the goal of generating extra income in their accounts on a regular basis. As an investment professional with 30 years experience in the financial services industry, I wholeheartedly recommend this book.
Jerome Tuccille
Best selling author, Financial Advisor

I highly recommend "Covered Calls and Naked Puts" by Ronald Groenke. It is an excellent supplemental text for finance courses. The book does a fine job of illustrating how writing options can be used to enhance the returns on a common stock portfolio. The real world context in which the story unfolds is a critical advantage, allowing students to observe a derivatives strategy in a practical application.
Professor J. Howard Finch, Ph.D.
Eminent Scholar in Finance, Florida Gulf Coast University

I read "Covered Calls and Naked Puts" last night. Congratulations! Have not enjoyed an academic book this much since reading "The Goal" by Goldratt, 15 years ago. I found myself into the story, wanting to get a pencil and paper, find a calculator, grab a Wall Street Journmal, and get to work making money. The story line is subtle and believable. The covered call explanation is clear and a logical development of the formulas. The examples blend into the construction of the total theory of making money via covered call technique. This could be a "How to..." book or an academic supplement to a hedging financial instruments course.
Dr. Bob Cluskey, CPA
Professor of Accounting, State University of West Georgia

Edition details

• Publisher: Keller Pub
• Publication date: 2007
• ISBN 10: 0967412897
• ISBN 13: 9780967412894
• Binding: Paperback
• Language: English
• Number of pages: 149