In the next several paragraphs, I will hereby attempt to summarize the quantitative trading methods and strategic decisions that I employ to generate competitive returns.

In sum, my style and method-of-choice of equity and stock option selection is based solely on technical and fundamental analysis.

In the past 8 years, I have put through benchmark trials a unique investment methodology which incorporates the purchase of the “underlying” shares of a particular company, while simultaneously writing the shares’ “deep-in-the-money” covered call option equivalence. The goal of this method is to simply forfeit the underlying shares by option expiration (third Friday of every month), while pocketing the intrinsic time value of the calls’ premium. In order for this method to consistently succeed, the following cardinal principles must be implemented:

1. The selection of the company’s underlying shares must be trading at multiples much lower than its peers in the sector or relative to the major benchmark indexes (Dow Jones, Nasdaq, S&P 500). Companies whose shares have fallen out favor by Wall Street analysts are best suited for this strategy, because more often than not, the shares stagnate and allow the time value on the written calls to depreciate, thus adding dollar value to your portfolio. Share stagnation is also highly favorable amongst professional call writers because it allows them to capture next month’s calls and capture an increased premium value without worrying about shares appreciating.

2. Avoid selection of companies whose shares point to a downward trend, a breach in technical analysis. Should this occur, the writer of a call is then obligated to roll lower strike options to safeguard the shares from further decline. Nevertheless, in such a situation, one could dollar cost average the underlying shares, provided that the company’s fundamentals are intact.

Let’s place the above strategy into a perspective example.

Suppose You purchased 1000 shares of Intel (INTC) at 22.50/share and wrote 10 calls (contracts. Each contract representing 100 shares) for the month of September, strike 22 at .90/contract. This translates into an intrinsic time value of .40/contract times 1000 shares in one month. You’d take the premium of the call at .90 cents and added to the strike of the call at 22. This would give you a total of 22.9 0/share. Then, you’d subtract 22.90 from the price of the shares originally purchased (22.50)… This would yield .40/contract times 1000 shares. In sum, if INTC is above 22.00 by the third week of September, you’d have netted 400 dollars on a 22,500 investment in one month. If INTC finishes below 22. 00/share, then you get to keep both the shares and the entire .90 cents/contract.

In the event the shares are kept as of option expiration, I would roll the September call options into the October, generating more premium, until my shares mature to the level deemed ready for discharge (sell).

I abide by a principle which goes against many seasoned professionals– I never set stop-loss limits on either the underlying shares nor the calls. I have enjoyed tremendous success by simply allowing my strategies to pan out. Never ever get involved with any underlying equity shares that you’re not willing to hold!

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