Systematic Covered Writing
'More than just Covered Calls'
ESTABLISHING A PLAN
In order for an investment strategy to be effective it should have two characteristics. First, it should be simple and second, it must be repeatable. These principles apply to more than just Systematic Covered Writing. Truly successful endeavors should be able to be repeated and they should be simplistic in terms of implementation. Here is how simple the 'Plan' is for any individual stock position within the Systematic Covered Writing portfolio:
· Step One - Enter a covered position with the acknowledgement nobody knows.
· Step Two - Wait to see what happens. The stock’s value is either going to appreciate dramatically, slightly, remain the same, decrease slightly or decrease dramatically.
· Step Three - Based on what happens to the value of the underlying stock position, one of the Systematic Covered Writing strategies is implemented to continue the cash generation process.
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The Position Flow Chart below illustrates the simplicity of the process. Once the stock is owned, the sale of any call option against this stock begins the flow chart process. This call may be the first option sold or any subsequent call against the stock. Once the call is sold, there are a limited number of net changes that can occur to the value of the stock from the time of the sale to the time the option expires.
For example, each Initial Position will end with one of three possibilities:
1. The Initial Call Option may be exercised and the stock assigned (sold).
2. The Initial Call Option may expire with the covered writer keeping the premium and the stock.
The covered writer may choose to intervene and close the call option early and replace it with another option.Systematic Covered Writing
POSITION FLOW CHART
The chart above will be explained in great detail once the strategy section begins. For now, the material is presented only to illustrate the simplicity of the entire process. This process (selling the call option), may be repeated over and over and may take place over the course of a number of years. The key point is to realize that there is a repeatable process or plan, a method or a way to cope with whatever change happens relative to the value of the underlying stock.
With the Position Flow Chart in mind, the Systematic Covered Writing process or ‘Plan’ can be described as follows:
1. Call option is sold.
2. One of five overall changes in value will take place while the underlying stock is covered.
3. At some point in time, one of three outcomes to the Initial Position will take place.
a. The option transaction will be exercised
b. The option transaction will expire
c. The option transaction can be closed.
4. If exercised, another Initial Position is established and the ‘money’ begins at step (1.) again.
5. If the option expires, a new call is sold and the position is back to step (1.).
6. If the call that was sold in step (1.) is purchased by the covered writer to close the option, then a new call option is sold and once again the position is back to step (1.)
Currently, there are fifteen different strategies used within the Systematic Covered Writing process. On this Web site these strategies are discussed in detail. The six steps listed above can be summarized with this statement:
A call is sold . . . one of five events will take place . . . a new call is sold. Then . . . one of five events will take place . . . and another new call is sold. Over and over the process continues.
Once an investor realizes the value of the stock cannot be controlled, then acknowledging there is little need to be concerned about ‘value’ should be easier to accept. What a Systematic Covered Writer controls to a great degree, is the cash flow received because a stock is owned in a portfolio. The writer selects the strike price as well as the expiration month and can even change his or her mind by closing a covered position completely or just the option. The writer is in control, there is no need to worry.
You have just read an excerpt from Systematic Cover Writing - The Complete process. Please take the time to consider the following:
... more than just covered calls!
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Systematic Covered Writing is an investment methodology designed by, and for investors who no longer appreciate the old school Buy and Hold strategy of investing. It is not a 'get-rich-quick' scheme, but rather an investment philosophy based on five specific principles, one of these principles is imbedded in the following observation by Nick Murray:
If markets and/or investments lent themselves to rational analysis in any significantly predictive way, somebody (or, more properly, somebody's computer) would have perfected that analysis long since, and would have taken away all the chips of everybody else at the table. This has not happened. And if it hasn't happened by now--with every computer nerd in the world washing through his computer every recorded trade since the Assyrians swapped wheat to the Babylonians for bronze--it ain't gonna happen. The secret [to investing] is: there is no secret. (Murray, 1996,p.38)
Reference:
Murray, N. (1996). The Excellent Investment Advisor. New York: Nick Murray
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A comment from a SysCW subscriber:
“The SysCW process has been an absolutely wonderful blessing in the lives of myself and my wife, our children, and will continue to be for their children as well. Rich has taught us much about not just surviving but really thriving in any kind of market condition. He has mastered the art of consistently beating the market in good times and bad, and has provided us with a growing portfolio for the first time in several years. His knowledge is immense, his consistency in trading profitably is unmatched, and his dedication to helping others is without comparison anywhere in the financial world.”
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Here is what Jim F. had to say about Systematic Covered Writing:
I have known Rich for more years than I care to remember. Fifteen years ago he started a search for a investing vehicle that would provide income (growth) and preserve accumulated wealth. His main objectives were to accomplish his goals with maximum control over the process thus eliminating the stress of high risk investments. He has been driven to make every aspect of the system work to perfection. Not so much for personal gain but to help investors meet their goals.
Rich is probably now in his tenth iteration of the system and has made [it] as flawless as possible. It provides an income far greater than anything I have seen in my lifetime. While I do not normally give financial advise, Rich can provide you with a relativity simple, low risk path to a lifetime of stress free, profitable investing.
Jim F. is a retired military aviator who was a White House pilot for Presidents Nixon and Ford.
Jim F.
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Here are few words regarding the SysCW [from Suresh]:
I am a very happy and satisfied subscriber of SysCW. In fact, just [a] few months after joining the excellent service, I liked it so much that I changed my method of payment from monthly to annually, as I straight away new that this is the place where I want to be.
Many books on trading will tell you to seek a strategy that gives you “consistent return”. That’s exactly what you have here. It’s not a “get rich quick” scheme, but a methodology that writes a call on well diversified portfolio of stock.
For me, and many other traders, risk is the most fearful concept of trading and reward is something that one very greedily looks for. This balance is dealt with at SysCW so wonderfully that I have never had to worry about any trades that I put on. Primarily, writing “in the money” covered calls and just a bit further out in time helps to control the risk at the same time ensuring that the defined rewards are met. I have observed that Rich of SysCW is always aware of “how much protection” the covered call is giving you.
I am continually amazed at Rich’s ability to pick winning stocks. One thing that I enjoy about SysCW is being able to trade my portfolio. There are many sites out there that will help you with Covered Calls. As a well informed option trader, I don’t have any problem trading covered calls. I have studied these concepts and the principles are very straight forward. However, when it comes to applying this to the entire portfolio then no one who does it as well as SysCW. I am able to hold a very diversified portfolio of stock that produces regular income. Whilst I don’t have an expectation getting 100% return overnight, I know that it is well protected.
Suresh J. (Suresh is a retired pharmacist residing in the United Kingdom.)A subscription to SysCW comes with a 100% money back guarantee!
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“I think you are a genius, Rich. I really do. And I’m not saying that because my portfolio has increased since you began helping, but because you have demystified profitable stock trading for me and brought it down to simple terms that are easily understandable.” Mike C. ................
“I absolutely love your passion for this as it is quite amazing to me. Thank you so much for taking the time to answer these type of questions as it provides me with the confidence necessary to tackle such a new and daunting concept, but it makes more sense everyday as I read your emails and review your website information."
Keep up the fantastic work!” Dan ....................
“And thank you so much for all your tireless and gracious help throughout the year!! We look forward to another successful year together!” Bob E. ......................
"I find your system worthy of a Nobel Prize. Just would like to automate it a little more." Tom L. ................
“First of all....let me congratulate you for an awesome site!! I just discovered it about a week back (recommended by a "YAHOO" news group forum...), and absolutely love it!” Alex ...............
I can think of no one better qualified to write this book. As for comments I could go on for hours as to how your Systematic Covered Call process has changed not only my investing strategy but my life. As a retiree in 2008 suffering through the worst financial meltdown in recent history I found myself just short of panic. Your SysCW process changed my whole perspective on the value of cash flow and how I could control it. The SysCW process is not a panacea, a get rich quick scheme or a ticket to easy street but for the individual investor who is willing to put in the time to thoroughly learn the process it can be the ticket to FINANCIAL FREEDOM.
Good luck and keep up the GREAT WORK. Joe B. ............
Systematic Covered Writing
SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised:
04/19/11