Stock Option Income Generator

HARVEY C. FRIEDENTAG is an investment adviser and money manager. He is certified as a Federal Court expert witness on stock trading, options, and other derivatives. Specializing in covered call writing, Friedentag has been managing money since 1986 and has consistently generated annual returns of more than 15%. He is also the author of the book Investing without Fear, which has been called, "a gem of a book for serious option writers." Friedentag serves as President of the Contrarian Investment Club in Denver, Colorado.

• Preface xiiiAcknowledgments xviiChapter 1 Fear and Ignorance 1The Stock Market Crash of 1929 2Investment Knowledge + Stock Market = Profits 6Understanding Investor Behavior 6The Crash of 2008 7What to Do First 8My Investment History 10Summary 13Chapter 2 Invest with Confidence 15What is Investing? 18Asset Allocation 18Risk versus Reward: Finding Your Balance 19The Three Strategic Factors 22Stocks: The Long-Term Core 23Defining Investing and Fear 29Market Madness: Black Monday, October 19, 1987 31Market Anxiety is Caused by Many Factors 32Year 2008: The Collapse of the Stock Market 32Investing and Gambling 34Investment Policy Statement 35Discipline Can Be Really Good for You 35Chapter 3 An Overview of How to Invest 37Inflation 38Investing in Stocks 39Contrarian Investing 48Growth Stock Investing 48Common-Sense Stock Selection 49Dividend Income Stock Investing 50Keep in Mind 50Chapter 4 Stock Picking, Research, and Annual Reports 53Questions for Investment Decisions 54Sources of Investment Information 55Trade Press 57Investment Clubs 58Reading the Annual Report 59The Quarterly Report 66Changing the Rules 66Annual Meetings 67Stock Selection Summary 68Chapter 5 How to Read the Financial News 71Guide to the Economy and the Stock Market 74Your Wallet Can Be a Leading Economic Indicator 76Chapter 6 The Art of Investing, Risk, and Reward 79Stocks or Bonds? 80Market Timing 81Avoid Common Investment Risks 82Risk Breeds Fear 83General Investment Strategies 85The Tools of Contrarian Investing 89Classic Stock Market Statements 89Madness of Crowds 90Take Advantage of the Pros 92Insider Information 95Insider Trading is Not Always Illegal 96Buy, Sell, or Hold? 97Performance Records 100Investing Considerations 100Transaction Costs Compared 101To Make Money in the Stock Market, Don’t Lose Any 102Chapter 7 Dividend Reinvestment Plans 105Dividend Reinvesting Plans and Dollar Cost Averaging 107The Compounding Effect 108DRPs: Advantages for the Investor 108DRPs: Advantages for the Companies 109Using DRPs to Select Stocks 109Safety with a Small Investment 110Dividend Reinvestment Plans and the Compounding Effect 110The Dividend Debate 110Chapter 8 Picking and Dealing with a Stockbroker 113We Invest to Make Money 114The Buck Starts Here 115Shocking Facts: Is Research from Wall Street Useless, or Worse? 116The Stocks in the Dow Jones Averages 118Today’s Bargains Can Be Tomorrow’s Winners, and Today’s Winners Can Be Tomorrow’s Losers 120Why Use a Discount Broker? 121Understanding Procedures 122Chapter 9 Advanced Investing and Goal Setting 131Financial Failure 132Money × Return × Time = Your Goal 134Your Money 135Your Return 136Your Time 136Investment Risks 138Risk-Reward Relationship 139Chapter 10 Building Your Portfolio 141How the Pros Choose Stocks 142Benjamin Graham, the Value Investor 143How Other Professionals Invest 145Value versus Stock Price 146Buying and Selling Stocks 147Portfolio Management Guidelines 150A Reliable Way to Invest 155Chapter 11 Basic Investment Guidelines 159The Realities of Investing: Mind over Matter 159Don’t Panic 160Do Not Try to Predict the Market 160Capitalize on Stock Market Anxiety and Euphoria 162Remember, No One Becomes Poor Taking a Profit 163Understanding Bankruptcy 164Key Considerations 166Always Remember 168Chapter 12 Options and the Stock Market 171What is an Option? 171The Business of Options 172Options Share Many Similarities with Common Stocks 173History of Options 174Function of Options 175Factors Affecting Option Valuation 176The Option Premium 179The Option Strategy 180Some Questions and Answers 181Getting Started 182Why Sellers Sell Calls: Some Strategies 183Option Exercise 186Option Fundamentals 187Using Options and Margin 191What is Margin? 192Avoid the Premium Trap 192Put-Call Ratios 193Option Quotes 194Selling Options: Prudent Investing Method 194Chapter 13 Options and Potential Returns 197Naked Option Writing 198Starting a Covered Call Program 198The Pricing of Options 199Determining the Best Time Value 202Determining the Best Strike Price 203Determining the Best Underlying Stock 205When to Take Action 206Understanding Published Option Premiums 207Option Symbols 209The Standard Method of Using Options 211My Method of Using Options 211Chapter 14 Margin: The Credit You Can Use 215Advantages of Margin 217The Margin Account and Buying Power 218Margin Account Maintenance 219Margin Interest 220Important Margin Principles 222Opening a Margin Account 222Basic Ideas and Terminology 222Portfolio Valuation 223Portfolio Financials 223Margin or Maintenance Call 224Converting Dividends into Capital Gains 224Using Margin for Personal Purchases 224Chapter 15 Managing an Option Income Portfolio 227The Writing Possibilities 231Option Selection for Option Writing 233Selling Time Value 234Selling a Covered Call Option 235Stockbrokerage Commissions 237Buy and Write Strategy (Buy-Write) 237Formula for Stock and Option Selection 239The Option Buyer 240Proof That an Option Income Portfolio is a Winner 240Follow-Up Action 241Periodical Review of Portfolio Equity Holdings 242Option Income Portfolio Review 245Chapter 16 Option Income Portfolio as a Tax Shelter 247Investment Definitions 247The Option Income Portfolio and Taxes 249Option Contract Closing Transaction 250Tax Deferral 250Tax Gains or Losses 251Capital Loss or Gain Bank 252Chapter 17 Options: Standard Operating Procedures 255Rule of Thumb 256No Time = No Time Value 256Stock Price Goes Down 258Stock Price Stays the Same 258Stock Price Goes Up 259Selling and Buying Back Calls: One Stock for One Year 262Option Income Portfolio Procedure 263So Why Aren’t You Selling Options? 267Chapter 18 LEAPS 269LEAPS Options for a Longer Term 270LEAPS Pricing 271LEAPS Symbols 273Chapter 19 Conclusions 279Fear, Greed, Hope, and One’s Self 280Traits of the Winner 281Traits of the Loser 281The Surprising New Shape of the Economy 282Madness of Crowds Returns 284The Good News 286Remember Time Plus Money for Successful Investing 287Appendix Investing in Citigroup through the Years 289Citicorp: A Financial History 289Contrarian Investment Club History 291Resources 295Investing Books 295Option Books 297Information Links 298About the Author 301Index 303