From the July 01, 2009 issue of Futures Magazine • Subscribe!

New Insights on Covered Call Writing

New Insights on Covered Call Writing By Lawrence McMillan and Richard LehmanBloomberg PressNew York, New York$39.95, 229 PagesThroughout history, the cycles of the markets have had a tendency to repeat themselves. The market woes of 2008 are similar to other challenging economic times such as 1980 or 1974 as far as the severity of the bear markets and the kind of recession the country experienced. Covered call writing can help you make money in these consistently changing market conditions. It can reduce the volatility in your portfolio, generate income and help you profit from the up or down market swings. “New Insights on Covered Call Writing” offers different strategies to successfully write covered calls.The co-authors Richard Lehman and Lawrence McMillan both have more than 30 years of options trading experience. They explain many different ways of using covered call writing to consistently generate profits for your portfolio. Lehman and McMillan cover the basic terminology and give the reader a great overview of how options work, explaining covered calls, how to set up your options trading account and the different ways to value options. Lehman and McMillan focus on several different strategies, including the different ways to exit a strategy, such as rolling up and rolling out. Then the authors talk about some different scenarios and ways to profit such as hedging, writing calls on hot stocks, reducing risk and tax deferral strategies. The authors also discuss factors that affect the returns you make when writing a call, and offer some real world examples to show how effective it can be at reducing risk and generating income. Lehman and McMillan discuss the benefits of covered call writing and what you need to do to make your plan fall into place, such as deciding if you are going to write options short term or long term, potential challenges, how to search for the right stocks, how to select which calls to write, the different kinds of orders you can place and some basic tax rules on options.

The authors discuss how to write covered calls on margin, how to write covered calls against ETFs and how to write puts. They also explain how to use some of the different tools to find the right options trades: options chains, search tools, calculators, options software and Web sites. Both Lehman and McMillan feel that covered call writing will change the way you think, and improve your ability to adapt to changes, giving you additional ideas to help you profit in any market condition.Chris Seabury has more than 12 years experience following and writing about financial markets. E-mail him at

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