Covered Call Writing Demystified: Double-Digit Returns on Stocks in a Slower Growth Market for the Conservative Investor [Plastic Comb]

Paul D. Kadavy (Author)

Book Description

ISBN-10: 0971551405 | ISBN-13: 978-0971551404 | Publication Date: July 1, 2009 | Edition: Combined

COVERED CALL WRITING DEMYSTIFIED is a timely and profitable tutorial investment program written as a novel, primarily for investors who have some knowledge of stock market investing but are new to covered call writing. It is the first work on this subject to simplify, fully explain and instruct investors on how to use covered call option writing on common stocks and Exchange Traded Funds (ETFs). It may offer one of the best opportunities to achieve double-digit investment returns in the slow growth or no growth stock market expected by many experts in the future. This strategy works best in such a market environment. The investment approach of writing covered call options on stocks, a more conservative investment strategy than just owning stocks alone, has been available for decades. Until now, however, it has mostly been unknown or misunderstood by many investors.

Why is COVERED CALL WRITING DEMYSTIFIED needed? Many nationally recognized investment experts believe that the U.S. stock market in the future will most certainly produce significantly lower returns than the high returns of the past for many years to come. Some noteworthy examples:

* The long-term prospects for equities in general is far from exciting. - Warren E. Buffett, The Chairmans Letter, Berkshire Hathaway, Inc. Annual Report.

* If you own equities, over the next twenty or thirty years you will get a reasonable return...maybe it is 6%, maybe it is 7%. People who expect 15% a year are doomed to disappointment. - Interview with Warren Buffett by Maria Bartiromo of CNBC TV.

* Over the next century you should expect your share prices to average 6% (return) a year. Over the next five years, ten years, I think you will be lucky to come out even on share prices. - Sir John Templeton, now deceased pioneer in the mutual fund industry, Business Center, CNBC TV Interview.

* It is wise to have realistic expectations on the overall returns you can expect in the stock market, which over time should clock in at about 6% to 7%. The days of double-digit annual returns are probably over for some time to come. Suze Orman, The Financial Connection.

COVERED CALL WRITING DEMYSTIFIED is unique because:

(1) A detailed investment program is outlined for personal implementation to assist investors in achieving consistent double-digit returns utilizing covered call writing on common stocks and ETFs. This investment strategy is most effective in a slow growth or no growth stock market, as is projected in the future by many investment experts.

(2) The entire subject matter is centered on a focused area of standardized options...covered call writing on stocks an investor owns or acquires in the future.

(3) A complete education on the subject is provided.

(4) Unlike other books about options, it is easy to understand by any investor. The book is written as a novel, which increases reader interest and ease of comprehension.

(5) Numerous easy-to-use Microsoft Excel templates as well as manual worksheets are provided with the book to assist in making specific investment decisions regarding which covered calls to write on stocks, to effectively track results, and for other planning purposes.

(6) Practical application exercises are included at the end of the chapters to personalize the information provided and assist with profitable planning and execution.

Editorial Reviews

From the Author

I have successfully used the strategy of covered call option writing personally for almost twenty years. During that time, I have continually looked for books on the subject. I have never yet found one book that both (1) is totally dedicated to providing an education to the investor exclusively on covered call writing, and (2) provides a program for use by the investor to implement a covered call writing strategy. Virtually all of the books on the subject cover the broad spectrum of option investing, including ultra speculative uses as well as conservative ones. In addition, the authors I have encountered seem to feel it is necessary to impress the reader with their knowledge by making the subject matter virtually unintelligible.

I wrote "COVERED CALL WRITING DEMYSTIFIED" because there is no book like it on the market. It is written as a novel, which facilitates understanding. All levels of investors who have a basic understanding of the stock market can also readily understand it. Practical exercises are included to assist the investor with understanding the subject. And most important of all, it has everything an investor needs to actually implement a personal program of covered call writing on stocks owned or acquired in the future. Excel templates on a CD/ROM for PC use are included with the book. These are templates I’ve developed and used personally to make quality call option writing decisions and to keep accurate records of performance. Manual worksheets are also included so that investors who don’t use a computer can fully implement the program.

I hope you enjoy reading "COVERED CALL WRITING DEMYSTIFIED" as much as I enjoyed writing it.

About the Author

As a thirty-year career banker and trust officer for Norwest Corporation, now Wells Fargo & Co., one of the nation's largest financial institutions, Paul D. Kadavy was president of numerous banks in three states. He also headed a multi-billion dollar trust department, managed a team of investment professionals, and was a trusted advisor to many of the banks' individual clients. He also subsequently served as president and chief executive officer for another banking enterprise in Las Vegas, Nevada. He is now retired from banking and is a writer, teacher and public speaker.

Kadavy has served on the faculty of the National Graduate Trust School at Northwestern University, The Schools of Banking, Inc., the American Institute of Banking and numerous community colleges in several states. He has been a lecturer on trust, investment and banking subjects to FDIC and Federal Reserve Bank examiners in Washington, D.C. He has been a public speaker for the past twenty-five years.

In addition to authoring Covered Call Writing Demystified, Kadavy has also written Put Option Writing Demystified, Covered Call Writing with Exchange Traded Funds (ETFs), Covered Call Writing with Qs and Diamonds, Writing Uncovered Put and Call Combinations, Short Spider Straddles, Put and Call Option Writing for the Investment Advisor and Financial Planner, Personal Cash Flow and Net Worth Planning Demystified and The Book of World-Class Quotations: The Best of the Best Quotations on Earth. All of his books are available on Amazon.com.

In addition to writing books, he is the author of banking, trust and investment articles for such national publications as Financial Review, Trusts & Estates, Pension World, The Collector/Investor, Cases & Comment and American Bankers Association Trust Management.

He has developed and successfully used the principles in his books for over twenty-five years.

Product Details

• Plastic Comb: 326 pages
• Publisher: Arrow Pubns; Combined edition (July 1, 2009)
• Language: English
• ISBN-10: 0971551405
• ISBN-13: 978-0971551404
• Product Dimensions: 8.6 x 6.1 x 1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.9 out of 5 stars  See all reviews (28 customer reviews)
• Amazon Best Sellers Rank: #377,458 in Books (See Top 100 in Books)

More About the Author

As a thirty-year career banker and trust officer for Norwest Corporation, now Wells Fargo & Co., one of the nation's largest financial institutions, Paul D. Kadavy was president of numerous banks in three states. He also headed a multi-billion dollar trust department, managed a team of investment professionals, and was a trusted advisor to many of the banks' individual clients. He also subsequently served as president and chief executive officer for another banking enterprise in Las Vegas, Nevada. Now retired from banking, he is a writer, teacher and public speaker.

Kadavy has served as a faculty member of the National Graduate Trust School at Northwestern University, The Schools of Banking, Inc., the American Institute of Banking and numerous community colleges in several states. He was a lecturer on trust, investment and banking subjects to FDIC and Federal Reserve Bank examiners in Washington, D.C. He has been a public speaker for the past twenty-five years.

He has written many banking, trust and investment articles for such national publications as "Financial Review," "Trusts & Estates," "Pension World," "The Collector/Investor," "Cases & Comment" and "American Bankers Association Trust Management."

Kadavy is the author of many financial and other books including "Covered Call Writing Demystified," "Covered Call Writing with Exchange Traded Funds (ETFs)," "Covered Call Writing with Qs and Diamonds," "Put Option Writing Demystified," "Writing Uncovered Put and Call Combinations," "Short Spider Straddles," "Put and Call Option Writing for the Investment Advisor and Financial Planner," "Personal Cash Flow and Net Worth Planning Demystified" and "The Book of World-Class Quotations: The Best of the Best Quotations on Earth." His books are available on Amazon.com.

Kadavy has completed his first novel and is currently working on a second novel, both of which he plans to publish around the end of the year.

Customer Reviews

Most Helpful Customer Reviews

58 of 59 people found the following review helpful:

3.0 out of 5 stars Too much emphasis on Return, not enough on Risk, September 2, 2003

By 

Howard Moore "pasadena_reader" (Pasadena) - See all my reviews
(REAL NAME)   

This review is from: Covered Call Writing Demystified: Double-Digit Returns on Stocks in a Slower Growth Market for the Conservative Investor (Plastic Comb)

This book is a good overview of covered calls for investors new to this strategy; one of the best I have seen. However, the book discusses primarily return, and minimizes discussion of risk, which I believe is a disservice to new covered call writers. Covered call writing is NOT a low risk strategy. It is LOWER risk (i.e., lower than simply owning stocks), but it is not LOW risk, and there is no guarantee of achieving the double digit returns which are advertised as being presumably easy to attain. Covered call writers still assume ALL the risk of owning stocks, less the call premiums received.

For example, it is very easy to view a $1 premium on a $20 stock as a +5% return when the transaction is initiated. But if the stock declines to $15 upon expiration, the total return is actually -$4 (-20%), which would wipe out several months of gains from other successful covered writes. This outcome is a very real possibility, even though in this book there is little discussion of this outcome or what to do about it, or, better yet, how to prevent it.

Another good book on Covered Calls is "New Insights on Covered Call Writing", which more thoroughly explains the risks involved with a covered write investment program.

As with any investment strategy, it is best to (1) learn as much as possible, (2) make sure both reward and risk are understood, and (3) practice on paper before jumping in with real funds. Toward this end, I found both books very helpful.

35 of 35 people found the following review helpful:

3.0 out of 5 stars Not worth the money, January 10, 2004

By 

Michael L. Matthews Bitsnabyte (Clearwater, FL United States) - See all my reviews
(REAL NAME)   

This review is from: Covered Call Writing Demystified: Double-Digit Returns on Stocks in a Slower Growth Market for the Conservative Investor (Plastic Comb)

I generally will not trash a book that is targeted at the novice but this will be an exception. First, I am a novice at options investing so should have been right in the middle of the target market for this book. Fact is, I learned more just searching the Internet while I was waiting for the book to arrive than I learned from the book. It is just too simplistic. All the knowledge contained in this book could have been conveyed in a 20 page pamphlet rather than this 300+ page puff piece with its wide margins and large fonts. A true disappointment.

68 of 73 people found the following review helpful:

4.0 out of 5 stars Low risk strategy only with the right timing tools, September 6, 2003

By 

Allen Morrison "traderpro" (Manhattan , New York) - See all my reviews
(REAL NAME)   

This review is from: Covered Call Writing Demystified: Double-Digit Returns on Stocks in a Slower Growth Market for the Conservative Investor (Plastic Comb)

I am a professional trader, in other words I have been making a living exclusively trading stocks and options for the past few years.
My experience has been that covered call strategy is low risk only if you have the right timing techniques to alert you to reversals. Unfortunately this book lacks in that area.
Let us take the example where you get a $1 premium on a $20 stock by selling a covered call say at a $20 strike. It is true that if the stock declines to $15 you lose $4. If on the other hand you had the timing techniques that could alert you to a reversal , you should have bought the $20 strike call back with say the stock at $19 for $0.25 making a $0.75 profit and sold a $15 strike call for $4+ which you can then close for a profit when the stock goes to $15. Waiting for the option to expire is not always the right strategy. The issue is how can you tell if there is a pending reversal and this is where timing is critical . Using these strategies you can indeed achieve double digit returns just by taking advantage of the stock short term movements.
While this book is a good introduction;to get the most benefit from this book you need to supplement it with another that focuses more on timing.