Option Expiration Dates JAN ’04 ’07 FEB ’04 ’07 1/20 1/17 2/17 2/21

Exp. Mo

January Sequence Cycle Available Months JUL OCT OCT OCT JAN JAN JAN APR APR APR JUL JUL AUG AUG NOV NOV NOV FEB FEB FEB MAY MAY MAY AUG SEP SEP SEP DEC DEC DEC MAR MAR MAR JUN JUN JUN

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Hedged Strategy Cheat Sheet

MAR ’04 3/20 ’07 3/17 APR ’04 4/17 ’07 4/21 MAY ’04 5/22 ’07 5/19 JUN ’04 ’07 JUL ’04 ’07 6/16 6/19 7/21 7/17

AUG ’04 8/21 ’07 8/18 SEP ’04 ’07 9/22 9/18

FEB MAR APR JAN MAR APR JUL FEB APR MAY JUL MAR APR MAY JUN JUL JUN JUL OCT MAY JUL AUG OCT JUN AUG SEP OCT JUL SEP OCT JAN AUG OCT NOV JAN SEP NOV DEC JAN OCT DEC JAN APR NOV JAN FEB APR DEC February Sequence Cycle JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC FEB MAR MAY MAR APR MAY APR MAY AUG MAY JUN AUG JUN JUL AUG JUL AUG NOV AUG SEP NOV SEP OCT NOV OCT NOV FEB NOV DEC FEB DEC JAN FEB JAN FEB MAY March Sequence Cycle FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN MAR JUN APR JUN MAY JUN JUN SEP JUL SEP AUG SEP SEP DEC OCT DEC NOV DEC DEC MAR JAN MAR FEB MAR

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Equivalent Annual % Return
Months Days

1 30

2 60 12.0 30.0 60.0 90.0 120.0 150.0

3 90 8.0 20.0 40.0 60.0 80.0 100.0

4 120 6.0 15.0 30.0 45.0 60.0 75.0

5 150 4.8 12.0 24.0 36.0 48.0 60.0

6 180 4.0 10.0 20.0 30.0 40.0 50.0

7 210 3.4 8.6 17.1 25.7 34.3 42.9
HOT!

8 240 3.0 7.5 15.0 22.5 30.0 37.5

9 270 2.7 6.7 13.3 20.0 26.7 33.3

10 300 2.4 6.0 12.0 18.0 24.0 30.0

11 330 2.2 5.5 10.9 16.4 21.8 27.3

12 360 2.0 5.0 10.0 15.0 20.0 25.0

OCT ’04 10/16 ’07 10/20 NOV ’04 11/20 ’07 11/17 DEC ’04 12/18 ’07 12/22 JAN ’05 ’08 FEB ’05 ’08 1/19 1/15 2/16 2/19

2% 5% 10% 15% 20% 25%

24.0 60.0 120.0 180.0 240.0 300.0

MAR ’05 3/19 ’08 3/22 APR ’05 4/16 ’08 4/19 MAY ’05 5/21 ’08 5/17 JUN ’05 ’08 JUL ’05 ’08 6/21 6/18 7/19 7/16

Expiration Month Codes

AUG ’05 8/20 ’08 8/16 SEP ’05 ’08 9/20 9/17

OCT ’05 10/15 ’08 10/18 NOV ’05 11/19 ’08 11/22 DEC ’05 12/17 ’08 12/20

CALLS PUTS JAN A M FEB B N MAR C O APR D P MAY E Q JUN F R JUL G S AUG H T SEP I U OCT J V NOV K W DEC L X

Write your broker information here:

Key
Strike

A
5

B
10

C
15

D
20

E
25

F
30

G
35

H
40

I
45

J
50

K
55

L
60

M
65

N
70

O
75

P
80

Q
85

R
90

S

T

U

V

W

X

Y

Z

95 100

7.5 12.5 17.5 22.5 27.5 32.5

Prices 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 37.5 42.5 47.5 52.5 57.5 62.5
205 210 215 220 225 230 235 240 245 250 255 260 265 270 275 280 285 290 295 300 67.5 72.5 77.5 82.5 87.5 92.5 305 310 315 320 325 330 335 340 345 350 355 360 365 370 375 380 385 390 395 400 97.5 102.5 107.5 112.5 117.5 122.5

MISC...

Important Hedged Strategy Web Sites: PowerOptionsPlus.com (Highest return investments) MarketIntelligenceCenter.com (Options NewsBites) cboe.com/LearnCenter/Concepts/Basics/terminology.aspx 888options.com/strategy (General Strategies) 888options.com/strategy/covered_call.jsp (Covered Calls) 888options.com/strategy/collar.jsp (Collars) 888options.com/classes/ (Free Online Classes) 888options.com/resources/investigator (Tool) cboe.com/Strategies/WeeklyArchive.aspx (Ideas) finance.yahoo.com/q/op?s=MSFT (Option Quotes) CNNfn.cnn.com/markets/morning_call/ (A.M. News) CNN.com (General News) NYT.com (The New York Times) WSJ.com (Wall street Journal) Bloomberg.com (Investment News) Msnbc.com TheStreet.com CBSMarketwatch.com Quotes.com (Free real-time stock and options quotes) MarketEdge.com (Buy, Sell or Hold a Stock ) Bigcharts.com, Barchart.com Siliconinvestor.com (Gossip in the message boards)
NEWS/RESEARCH GETTING STARTED

biz.yahoo.com/research/earncal/today.html

Rules of thumb for covered call option investors
1.
Avoid writing covered calls over a period of earnings announcements because sudden price changes can occur. 2. It’s best to write at the money options unless you are consciously trying to play the market going up (out of the money) or trying to be more conservative for safety (go deeper in the money). 3. Don’t try to over trade by attempting to get the last 5 cents. Covered Call writing is a longer period trading strategy. It involves monthly or quarterly time frames not hourly. 4. Be consistent, work it every month. The objective is to do ten trades at 4% not two trades at 20%. Don’t try to over push the return. 5. When writing out of the money options, consider writing at least 60 days before the option expiration date to get a better selling price. 6. When looking for a buy/write investment opportunity be sure you have considered all the investments that meet your risk criterion. Why invest your money to get a 7% return when a 15% return is available. PowerOptionsPlus.com will help you with this. 7. Consider rolling your option positions before expiration if you can get your targeted profit. If you wait till they expire, you will be in the market trying to sell them again with everyone else. The prices will be depressed. 8. If you think the market or a stock is on the way down, write deep in the money options. 9. If you think the market or a stock is on the way up, write out of the money. 10. Set a firm profit target (Return %, Annual return %, or dollars) and stick to it. Don’t make a trade unless you make money. 11. Don’t panic if one of your stocks goes up and your options are all in the money. You can always roll the option out (another month or two) or up (go to the next higher strike price). And you will probably make money doing it. 12. When you do a Buy/write covered call for a riskier stock, let the option expire. Don’t get greedy and roll it again. Take your money and find new buy/write.

5.

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11.

12. 13. 14.

15.

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17.

General rules of thumb
1. Avoid trading in the first and last half hour of the trading day when the market is most volatile and when liquidity may be lower. Be sure to consider your commission charges when calculating your potential returns. Throughout the year as you rack up more profits, be sure to put enough money in totally safe investments (CD, Bond, Money Market) to pay your taxes. Sell on the anticipation of an event (Fed announcement, earnings report, election, etc…) when everyone else is buying. When the event finally happens, buying usually slows down.

18. 19.

2. 3.

20.

4.

21.

Don’t over commit your funds. When you have all your money on the line, you will find it hard to make rational decisions. Don’t put all your eggs in one basket. Plan to put your money in a variety of investments in a variety of industries, sectors, and geographic locations. Don’t put more than 5% of your total capital in any one investment. Don’t pyramid your profits. When you make a profit, don’t plow 100% of that profit back into an investment at the same risk level. Take some money off the table. Expect to lose money on some investments. It happens. If it doesn’t, you’re not in the market. If you’re diversified, a few losers won’t hurt too bad. Always trade with a clear profit objective and date. That’s how you know when to finally get out of an investment. If you hold everything forever, when do you really win? Be careful when trading takeover candidates. Most of these don’t happen and when they do it takes longer than expected. And when the takeover happens, results usually sour. It’s hard to put two companies together and make it really work. Trade based on the numbers and your research. A hunch may pay off occasionally but that’s called luck. Do the research and stick with your criterion. Don’t buy a stock just because it is low priced. It could go lower. Don’t sell a stock just because it is high priced. It could go higher. Invest only in actively traded stocks and options. Set an average daily volume target for your new investments and only trade in those that meet the target. Know what you plan to do before the market opens and do the research ahead of time. Once trading starts there may not be enough time to do all the research needed to make decisions. Get your information from multiple sources. Don’t just trade on single source newsletters, newspapers, trading strategies, etc… Only get into an investment based on your research. Not because the stock is moving up. Not because of a rumor. Not because of the FED. Always consider your risk and reward on every investment. Don’t use the money you need to live on to make investments (except CDs, Bonds, Money Markets). You want to give your investment time to grow and not have to cash them in in a panic to make a rent payment. Watch out for so called investment gurus, brokers, experts, and pundits who don’t trade. If their advice was right all the time they would be out on their yacht right now. Forget buying the stocks you see touted in monthly magazines. That article was written many weeks ago.

22. Trade with the broker that’s right for you. Demand the service that you want at a reasonable commission rate. Change brokers if you can’t get it. 23. Be sure to read your execution reports and monthly statements thoroughly. Even the big brokers make mistakes. 24. Try to learn from your own mistakes. It’s okay to make a mistake once but don’t make the same mistake twice. 25. Set a monthly, quarterly or annual goal for your portfolio. If you make it, celebrate. Go out to dinner, on a trip, or buy that new car. You deserve it!

Some tricks of the trade
1. Check at cnnfn.cnn.com/markets/morning_call in the morning before U.S. markets open to see how stocks are doing in Europe. If they are strong there, they will most likely be strong here. 2. Check the premarket stock prices as a good indication of where a stock will open. 3. Each stock and option trade passes through the hands of a market maker. They each have their own personality and you will see it in the trade execution. Some will buy faster. Other will wait for the price to come down. Learn how they work on your frequently traded positions. 4. Spend the money to get the tools that you need. A faster computer or Internet connection. The right book. That essential data service (like InvstorsObserver.com or PowerOptionsPlus). These investments will pay back many times. 5. Level III information – When you want a periscope into what’s really happening with a stock, look at the real-time level two trading action. You will see if the stock is really strong or weak and how long it might remain that way. 6. At least lurk (read without writing) in the stock bulletin boards. You will get some idea of the sentiment and maybe even some new strategies. But only trade on your own research. 7. If you notice a trade pop up on your account that you didn’t make or that you made in error, call your broker immediately. They can reverse the trade. Don’t do it too often. 8. Push your broker for better commissions. He probably doesn’t want to lose you and you won’t get the better rates without asking. You will save thousands a year. 9. Make backups of all your computer records daily. Spreadsheets, research, trading logs, etc… Your computer will crash some day and your backups will save you. 10. Talk to successful investors and learn how they made money.

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