[...] been more interested in learning about options lately, in particular, covered call option writing.  Basically giving another investor the option of purchasing a stock that you own at a set [...]

[...] For some people, this cost of insurance might be too high and they may want to find a way to reduce or eliminate it. If Sally were to turn around and SELL a call option (this means she is giving someone ELSE the right, but not the obligation, to buy her units) for a strike price of $110, she might get $1.50/share from the sale of that contract.  This is what is known as writing a covered call. [...]

Bull Call spreads aren’t considered naked (at least not in my eyes – purists might make a distinction between covered and protected), I take the position that they are *protected* as opposed to *covered* (which accomplish the same thing) so long as the two option contracts have the same expiry date.

You would have to check with your brokerage company to see what kind of trades they allow in your accounts. For example, the last time I checked, a large discount broker did not allow collars, straddles, or strangles, etc. in any types of accounts.

Your brokerage company will have a policy and guidelines brochure online to address all your questions.

Hope that helps! :)

[...] Part 3:  Call Option Writing [...]

[...] Part 3:  Call Option Writing [...]

If I had the luxury of more time – I would incorporate graphs and pictures and drawings into all posts – but unfortunately, I’ve had to “draw the line” as it were, with just the writing.

Maybe I will cut down the posting frequency and increase the supporting content. I think you are right – more people would have a better time understanding some concepts with some simple diagrams as not everyone learns in the same way (auditory, visual, etc.).

Thanks for the kind words too! They give me motivation to keep on writing.

I will incorporate your suggestion about the graphs and diagrams into a book I’m writing – it is on RRSP’s and covers about 30 or so planning strategies, the ins and outs, etc. It is aimed at advisors AND investors and I need to make it easy to understand for as many people as possible. I was on the fence about adding graphs and diagrams, but I think that was just me trying to find the easy way out. Your comment made me realize that the ROI of adding the graphs/etc is worthwhile – thank you.

Preet

This article series was good and clear though, I could show this to my fiancé and she would get it.

Only -ve comment (which I’ve used before), would be to have pictures, even just text and arrows made in Paint. I know that it sounds like a pain in the butt, but from my teaching experience, a lot more people will “get it” if they see drawn. Just my $0.02.

But thanks for the great writing.

Next, when you go to enter in a trade – just change the market to the Options market and fire away: you will have the option of buying or selling, calls or puts.

Your online broker will have a drop down list available (usually) once you enter in the option symbol – you will be able to select from a number of strike prices.

Options trade just like stocks – so you can enter “good through” orders, Limit or Market orders etc.

Some online brokers may not allow you to hold naked positions – which will help you from blowing up, but not all do, and you can’t assume that because they allow you to enter a trade it means it is a conservative option stragegy – so make sure to do your homework thoroughly! :)

If anyone is interested in trading options for the first time, you would want to visit the Montreal Exchange’s website and download the Options Guide first, read it and then execute your first few trades with one of the telephone-based traders. It will cost you a few extra bucks, but you really want to make sure you start out correctly and avoid making mistakes. Once you get more comfortable, it will be as easy as trading a stock.

A good list of all tradeable options can be found on the Montreal Exchange’s website too as Derek pointed out in a comment of the first part in the article.

Click here to download the Options Guide from the Montreal Exchange

Click here to look up all the options you can trade.