Covered Calls and LEAPS--A Wealth Option + DVD: A Guide for Generating Extraordinary Monthly Income (Wiley Trading) (Hardcover)

by Joseph R. Hooper (Author), Aaron R. Zalewski (Author), Robert Kiyosaki (Foreword)
Key Phrases: selling high rule, first buy point, new covered call position, United States, Feb Mar Apr, Sep Oct Nov Dec (more...)

Editorial Reviews

Product Description
In this one-of-a-kind “how-to” guide, Joseph Hooper and Aaron Zalewski provide step-by-step instructions for generating large monthly cash returns from almost any stock investment—while at the same time decreasing the risk of stock ownership. Filled with in-depth insights and proven techniques, this book is the definitive, rule-based guide to covered calls and calendar LEAPS spreads.

From the Inside Flap
In this one-of-a-kind "how-to" guide, Joseph Hooper and Aaron Zalewski provide step-by-step instructions for generating large monthly cash returns from almost any stock investment—while at the same time decreasing the risk of stock ownership.

Debunking conventional wisdom on every page, the authors turn traditional stock investment philosophy on its head—no more reliance on rising markets to grow a portfolio, no more stock picking, and no more "stop losses." In their revolutionary philosophy of "growth through cash flow," Hooper and Zalewski demonstrate how writing covered calls against stocks provides consistent monthly cash income—regardless of market direction. Cash flow that can provide income in retirement or, alternatively, can be reinvested on a monthly basis to dramatically compound the growth of a stock portfolio.

Hooper and Zalewski also show how the romantic-ism of high-risk/high-return options trading leads the vast majority of speculators "to the slaughter." Most importantly, they reveal how the option seller can consistently profit from these losses.

In this detailed compilation of rules and techniques, developed over twenty-five years in the markets, the authors liken their safe, conservative, and time-proven covered call techniques as learning to become the "house in Vegas."

What's more, the authors pick up where other guides end: focusing on what to do when things do not go as anticipated and how to continuously generate monthly income from a stock position regardless of market direction. The authors explain how to manage stocks with covered calls to produce consistent monthly cash returns regardless of whether the stock or market is going up, down, or sideways.

Finally, Hooper and Zalewski examine how you can use calendar LEAPS spreads to dramatically increase the performance of covered calls. When used by experienced investors, this more advanced technique can provide returns nearly double that of the traditional covered calls with little increased risk. Again, the authors show how to manage these positions for consistent monthly income regardless of market direction.

Covered Calls and LEAPS—A Wealth Option is the definitive, dedicated, rule-based guide to covered calls and calendar LEAPS spreads. It is filled with in-depth insight and expert advice, and is the most complete writing ever compiled on the subject.

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Product Details

• Hardcover: 240 pages
• Publisher: Wiley; Har/DVD edition (November 3, 2006)
• Language: English
• ISBN-10: 0470044705
• ISBN-13: 978-0470044704
• Product Dimensions: 9 x 6.1 x 1.2 inches
• Shipping Weight: 15.2 ounces (View shipping rates and policies)
• Average Customer Review: 3.4 out of 5 stars See all reviews (61 customer reviews)
• Amazon.com Sales Rank: #67,534 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

191 of 202 people found the following review helpful:

1.0 out of 5 stars I returned it to Amazon, January 10, 2007

By	trader - See all my reviews

This book is basically the same material that Joe used to sell on his website a few years ago. Not much has been added. As already stated in previous reviews, most of the techniques have been around forever. The CSE fund was one of the big selling points on his website at one time and many people mirrored that account, as did I. It was his "show piece" to prove that his technique worked. Then one day the fund was mysteriously removed from the website, never to return. In my opinion, it was discontinued because it had lost so much value. You can sell calls, but if the value of the underlying stock decreases by 90%, then you still have nothing. I spoke with Joe's broker at OptionsXpress (for the CSE fund) and was told basically the same thing - that the account had just lost too much money. He told me that Joe was "just a good salesman". I traded with Joe for over 2 years. Most of his trades generated income, but the percentage that did not do well really lost huge amounts, more than enough to wipe out the gains. However, those losses were never documented on his site because he never closed them out. He just quietly forgot about them. I personally talked to both Joe and Aaron on the telephone about several of their positions that had "gotten in trouble" and neither one could offer any technique to correct the situation. For those of you who read the book and are thinking about the seminar - been there, done that, feel like a sucker. In short, the book does explain covered call techniques adequately - however, fails to point out the potential pitfalls and risks involved. Earning 5%+ in your investment account every month sounds too good to be true and it is.

83 of 85 people found the following review helpful:

3.0 out of 5 stars Covered Call Returns Via CSE Fund Data, December 29, 2006

By	Investor 222 - See all my reviews

Original review December 30, 2006

I have taken the CSE 2-day Intensive Seminar based on this book and have been investing with covered calls for the past year. I like the empowerment of the trading system for me to take investment control of my own retirement funds. I value learning the price channel principles in the book that help me find patterns to "buy low and sell high".

Something that makes me feel uneasy about covered call returns is how the book authors have administered an educational "CSE Fund" account. The data shows how it is possible to earn high returns from call sales while the account value rises slowly or can actually decline.

The following four slides appeared in the recorded 2-hour Introductory Seminar that I archived on September 13 2005 from the CSE website.

Slide #1:
Practicing what we preach
* The CSE Covered Call Fund is a covered call investment
fund managed by Compound Stock Earnings
* It began with a deposit of $40,000 of our own money into a
brokerage account
* Our objective is to generate 5% cash return per month
from the fund
* 8 year time horizon (we are long term investors)
- 5% per month end value will be $4,327,456
- 6% per month end value will be $10,750,361
* We are achieving 4.9% cash return per month

Slide #2:
Leading by example
* Clients are given access to the Fund
through an email service
* We email EVERY single transaction to
subscribers as it happens in our own
account
* This is an educational service, WE DO
NOT manage client's own money
- Client's learn by example
* Many clients do, however, choose to
mirror the fund's activities in their own
account
- They can do this as we email each
transaction to them as it happens
* We also send the brokerage statement to
clients -- it is totally transparent

Slide #3:
Putting our reputation on the line
* Why do we put our reputation on the line like this?
* We do this because we KNOW our techniques work
* We KNOW our techniques allow cash generation regardless of
market direction
* You will not find anyone else in the marketplace who does this
* Why? They are not confident enough in their ability or technique
to WALK THE TALK
* We put our ability and techniques against the market and allow
the world to see our results

Slide #4:
CSE Fund Brokerage Statement
* $5959.87 realized cash return in 4 months
* $5959.87 in 4 months = $17,879.61 in 12 months
* $17,879.61 represents annual cash return of 45%
- At the current return rate the fund will make 45% this year
* 45% cash return IGNORES the effect of compounding
* We are on target to reach our 60% return objective for the year
* The numbers are there in black and white

The "CSE Fund" was a great idea to demonstrate to clients how the CSE masters can apply the rules of the CSE Covered Call technique to dramatically grow an investment account value over several years.

The daily brokerage statement was emailed from April 2005 until June 13 2006 to clients who subscribed at $100 per month. The account value had decreased from $40K to $35K where it remains today. An email to clients explained that the "CSE Fund" returns have been impaired by large commissions. "In fact, had the commissions been equivalent to a deep discount broker, the original return objectives of the Fund would have been achieved." I estimated commissions less than $2K for the "CSE Fund" transactions. For example, 50 positions x $33 = $1650. If these commissions were reduced to zero, the account value would still be only $37K. Slides #1 and #4 state that the "CSE Fund" was meeting its objectives (even with the larger commissions). CSE stated a plan to move the "CSE Fund" to a deep discount broker before continuing with new trades, and to stay tuned for the new brokerage statement. Six months later, no further announcements have appeared. The "CSE Fund" has been quietly discontinued. There is no reference to the "CSE Fund" that is supposed to run for 8 years in the current version of the recorded 2-hour Introductory Seminar on the CSE website.

The "CSE Fund" with an actual brokerage statement evolved to a new "CSE Managed Covered Call Selections" service, beginning November 2005, that similarly teaches clients to enter and manage covered call positions. It is similar to the "CSE Fund". However no funds are actually invested by CSE for clients to view a brokerage statement. CSE publishes a summary of open and closed positions with percentage return data. However, the "CSE Fund" profitably-closed positions from April through November 2005 are included in the list, while the remaining "CSE Fund" open positions with large unrealized losses are excluded. This has the effect of exaggerating the returns of the "CSE Managed Covered Call Selections".

I have attempted to model the "CSE Managed Covered Call Selections" returns of a diversified account over one year with the results: account value growth = closed position realized gain + open position call sales - unrealized loss = 22% + 8% - 20% = 10%. The stock market has also gained about 10% during the same period.

In order for a covered call investment account to grow by 3-5% per month, the covered call returns would need to increase significantly faster than the unrealized losses. So far, I have not observed this to happen with either the "CSE Fund" or the "CSE Managed Covered Call Selections".

Update January 19, 2007

The "comments" at the end of this review provide additional info.

1. Authors respond to the book review to clarify inaccuracies, and I reply. The authors state that the "CSE Fund" is closed and has been inactive for almost a year so it technically has no current account value, instead of acknowledging the $35K closing account value. I replied with contradictory evidence showing dates and statements to several client emails in CSE Weekly Cow Reports that the "CSE Fund" was open as recently as October 7, 2006. To the best of my knowledge, CSE has not officially notified clients of the true status of this 8-year project that has lost money despite earning 5% per month cash returns. You read it here first.

2. Posted the audio transcript for the four slides of the recorded 2-hour Introductory Seminar archived on September 13 2005 from the CSE website. You can also view the video excerpt and the final "CSE Fund" brokerage statement via the YouTube website; search for "CSE Fund". The authors enthusiastically promote the 8-year "CSE Fund". Why would they want to discontinue this compelling demonstration of the CSE covered call techniques?

Update January 16, 2009

Posted the monthly results of a model of a "CSE Managed Covered Call Selections" Statement that computes the "Account Value Growth" in order to measure the rate that we can expect our Covered Call accounts to increase in value over time. CSE discontinued creating new positions in November 2006 and claimed to be managing the remaining open positions to a profitable close. CSE has abandoned these positions, just like it did the "CSE Fund".

At -7% total account value loss over three years, the result contrasts with CSE's claim for these positions to generate cash flow of 3% per month and double the asset base through compounding every three years. The data demonstrates that CSE income has failed to keep pace with open position losses. The stock market has declined by 29% during this period.

CSE has reacted. The latest "CSE Fund" YouTube video shows that CSE has removed posted videos promoting the defunct "CSE Fund" with the message, "This video is no longer available due to a copyright claim by Compound Stock Earnings Seminars, Inc." Why does CSE not want you to view the videos? You have another chance to view them.

CSE started another managed program August 27 2007 which shows the same pattern of losing money and abandonment. See separate Amazon Customer Review titled "What Are Returns of CSE Covered Call / LEAPS Selections?"

Summary of CSE trading services process:
1) CSE promotes new service and sells to clients.
2) Trading performance gradually degrades to mediocre.
3) Service is eventually abandoned or morphed without a final report to clients in such a way that new clients are unaware of the previous service and trading performance.

There is a Yahoo Finance "compoundstockearnings" discussion forum with over 900 members, many of whom are current or former CSE clients. You can locate and join the forum by googling "compoundstockearnings". It's free. You can view the daily "CSE Fund Statements" folder in the Files area. You can view the actual trade data of the "CSE Managed Covered Call" positions in "CSE Managed CC Trades.xls". You can also read messages from current and former CSE clients about their experiences, and you can ask questions.

66 of 67 people found the following review helpful:

3.0 out of 5 stars Interesting concept, but riskier than advertised, February 8, 2007

By	A. Williams (Melrose, MA) - See all my reviews (REAL NAME)

This is a well written book that has several creative techniques for selling and managing options. It also gives valuable advice and tips for how to time new stock purchases so that the odds are in your favor for the price of the stock to go up. For that alone it is worth the price since I realized after reading the book that I had previously been buying stocks at the WORST possible time. A mistake I will not make again thanks to this book. However, I have just a couple of caveats I feel compelled to pass on. First, buyers should be aware that a solid understanding of these techniques will only come after studying and reading the book several times. This is not a quick 5 minute tutorial and then you're on your way to instant millions. It will require some time and dedication on your part to really absorb and comprehend the method. Second, the technique is not as safe or conservative as the authors make it sound. People considering trying this as a way to grow their assets or generate steady income need to keep in mind that in order to achieve the compounded earnings they state are possible, nearly all of your principal money needs to be tied up in the stock market, in individual stocks. As any investor knows, the stock market is a fickle beast and no matter how solid and logical the rules in this book may be, you will still be at the mercy of it's unpredictable ways. One of the first stocks I bought and sold a call on dropped in price by 75% three days later on unexpected bad news. The panicked selling was a complete over-reaction by investors and the stock has since recovered slightly, but it demonstrates the sometimes random and unpredictable nature of the stck market. It also highlighted the fact that their management techniques for fallen positions do not always work in every situation. If the decrease in price is too great and/or a stock becomes out of favor with investors, then the demand and price for calls on that stock will be greatly reduced and it will not be possible to earn any significant money off that position until it turns around (if it ever does). Finally, if there should be a major market correction any time soon, we will all be in a world of hurt, covered calls or no covered calls. These are perhaps obvious points, but ones that I think get glossed over and forgotten as people begin imagining future riches.

Bottom line: If you are invested in the stock market already and have the stomach for potential major losses (not because of using this technique but due to general stock market declines) then I think this could be a useful tool to have in your arsenal.