Customer Reviews

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

5 star:		(15)
4 star:		(3)
3 star:		(5)
2 star:		(1)
1 star:		(4)

 

 

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.

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.

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.

I've been looking for every possible way to get my investment portfolio back on track since the market started its descent. What I've discovered is a huge irony: conservatism will outperform aggressiveness for a long,long time going forward. We can't just stop owning stocks, as there just aren't any acceptable alternatives. Kadavy's book gives us the prescription: stock ownership coupled with covered call writing...more conservative than just owning stocks by themselves. His book taught me exactly how to do it, in an easy step-by-step process (by the way, I haven't been able to find another book on this subject that even comes close to doing that). It's going to take me a long time to recover my losses, but at least I have hope there is a chance to do so. Using the book, my first two covered call writing trades have produced a return of over 20% annualized. The software with the book was extremely helpful in deciding which options to use. I highly recommend this book for anyone who is tired of trying to hit homeruns (and strikes out in the process) and is ready to starting hitting consistent doubles and singles. I should have been doing this years ago, but I didn't even know it existed.

This book has gotten a bum rap from a couple of people who consider themselves experienced covered call writers. Didn't they read in the book description that this book is designed for people that are new to this discipline? That's what I was until I read two of Kadavy's books on covered call writing. They are a lifesaver. So don't be misled. If you are an expert at this already, you probably don't need this book. But if you are new to the subject and want a detailed program for how to do it and make steady solid investment returns, this is the one.

If you have an interest in writing covered call options, this book is a "must read". I have been writing covered calls for over ten years. If I had only read this book at the outset, I could have avoided the mistakes and aprehension that go hand in hand with any new process or strategy involving your financial well being.
If not for covered calls, I would not have realized one dime of profit in the market for that last two years. This book will step you through the process better than any stock broker could or would. And remember, it is permissable to write covered calls in your IRA account for those of you suffering through this market. I write them every month in my IRA and most actively in my personal account.
Even with my extensive experience with covered calls, I was able to ascertain pieces of information that came as news to me. The software that comes with the book is worth the price of the book alone.

Finally, note that this book is written by Paul Kadavy, a very accomplished career banker with a national reputation in the financial arena. The book is easy to read and understand.
Everyone with an interest in the equity market should read this book and utilize the strategies setforth.

I had heard about covered call writing but never found a way to really learn about it. COVERED CALL WRITING DEMYSTIFIED explains this subject in a way that is easy for anyone to understand and use. The "practical applications" in the book really helped me. Right now I'm practicing and have positive results to show for it. I would highly recommend this book for anyone who is conservative but still wants to get high investment returns.

I received cash income equal to 30 times the cost of this book the next day in my brokerage account after my very first call writing transaction using these principals with 500 shares of stock. The annualized return on this transaction was well over 20%. I have subsequently had several other successful and profitable transactions with positive double digit results.

Like other reviews of this book, it has made me money...in my case, quickly and regularly. What a terrific strategy. I don't agree with some of the nuisance-type criticisms though in some of these reviews. I thought that the conversational, novel type of format not only made the book very readable, but it greatly helped my understanding of the subject material and kept my interest up throughout (I also like the author's sense of humor). I'm pretty new at covered call writing and I'm the kind of investor the book was written for. So, I appreciated the writing style.

Those who said that timing strategies aren't discussed perhaps didn't get to chapter 13, which is titled "Time In The Market vs. Timing The Market." I also found ample discussion of timing and related issues in chapters 6 and 7.

Finally, one reader suggested that the book was primarily written for investors with large portfolios. The author makes it clear that there are cost efficiencies to be obtained by using this strategy with larger portfolios, but that it is equally applicable for smaller portfolios. That's why stress is placed on keeping commissions low in the chapter "All About Brokerage Accounts And Writing Call Options." I also bought the author's book titled "Covered Call Writing With Exchange Traded Funds (ETFs)," which is a great book for those with lesser investable assets that want to use the covered call writing strategy and who desire simple diversification using ETFs.

All in all, a great couple of books that I would recommend to any investor.

This is the only book about options I've ever seen that can be understood and followed. The fact that it is written as a novel helped me understand it and also made it much more interesting. Best of all, this program worked for me. I've written several calls using this program and have gotten excellent annualized returns of well over 20%. The Excel software that comes with the book made it easy for me to make call writing choices. I highly recommend this book for investors with a stock portfolio who want to improve their investment returns.