With the PowerOptions BrokerLink, you can trade any position you find quickly, accurately, and easily. For more information please refer to the BrokerLink Help page. Feel free to email or call if you have any questions: 302-992-7971.

Before making an investment write down:

• your objective with the investment
• what to do if it goes up, goes down, or stays the same
• keep notes on your thoughts and events
• review the notes quarterly to improve your process
• use "My Portfolio" and the Notes/Stop Limits feature of the Profit/Loss Portfolios to manage these processes
  

Your choice of the strike price is how you control the risk in doing a covered call. For more information, see Learning Center, Tutorials, "Magic Strike Price" for a paper presented at OptionsXpress May 2006 Expo.

When considering covered calls that span several months, use the annualized returns to compare the different time frames on an equal footing.

When you do a search with SmartSearchXL, change only one parameter at a time. In this way if no results are found you will know what parameter change was too restrictive.

Generally, the highest annual returns are obtained by writing calls every month rather than several months out in time.

As the stock price moves up and down to a new strike price, consider taking some actions to take advantage of the move. See our Follow-up a Covered Call Position reference.

Beware of very high returns. If the returns are too high to believe, they are probably high for a reason. There is an error or there is generally very high risk associated with the high return.

Once you have analyzed a lower and upper stop limit for your position record those values using the Notes section. The Portfolio will alert you, with a note at the bottom of the portfolio, when those stops have been hit.

From the Profit/Loss Portfolio you can analyze one position at a time. Just link your position into the Position Analysis tool using the "More Info" buttons. This will calculate your original position, current liquidation value, and possible future expiration value. And then show potential Roll Out opportunities for most strategies.

You can add old positions into the Historical Portfolio to enhance your overall accounting. Simply click 'Add Closed Position' and enter in the information.

Remember, Puts are typically priced lower than calls. If you expect to get a 3% return on moderate Covered Calls, you might only expect to make 2.5% trading moderate Naked Puts.

Here are some useful guidelines:

• Only trade Naked Puts on stocks you would like to own.
• Use the Simple Moving Average field to find stocks in an uptrend.
• Use the Recommended Lists to screen for Recommended Stocks (S&P 5 star, etc)
  

If the stock drops you can:

• Buy back the put and accept the loss on the position.
• Buy back the put and sell a deeper OTM put to lessen the loss incurred.
• If you are still bullish let the put be assigned, then sell a Covered Call.
• Advanced - As the stock drops buy a put at a lower strike. This does not repair the Naked Put, but it stops major losses from occurring.
  

Deeper OTM (further below the stock price) Puts offer greater protection but less premium. An investor should not expect find trades 10% OTM with a 5% Naked Yield. Naked Put trades that are 10% OTM and offer a 5% yield carry a heavy risk (BioTech stocks). Due to pending events, like FDA approval, these stocks may drop 10, 20, or even 50% of their value causing large losses.

Shorting stock should only be done by experienced investors. Make sure you are aware of the risks with shorting stock and selling puts before you trade this strategy.

Deeper OTM (further below the stock price) Calls offer greater protection but less premium. An investor should not expect find trades 10% OTM with a 5% Naked Yield. Naked Call trades that are 10% OTM and offer a 5% yield carry a heavy risk (BioTech stocks). Due to pending events, like FDA approval, these stocks may rise suddenly causing large losses.

Theoretically, Naked Calls are considered the riskiest options strategy as a stock could rise infinitely. Make sure you have researched the underlying security thoroughly before placing a Naked Call trade.

If you are bearish on the stock you can greatly reduce potential risk by trading a Bear Call Credit Spread instead of trading a Naked Call.

If the stock rises you can:

• Buy back the call and accept the loss on the position.
• Buy back the call and sell a deeper OTM call to lessen the loss incurred.
• If you are still bearish let the put be assigned, then sell a Covered Call.
• Advanced - As the stock rises buy a call at a higher strike. This does not repair the Naked Call, but it stops major losses from occurring.
  

Create as many Portfolios as you like to separately track different accounts or strategies. You can have a Portfolio just for Long Stocks, one for an IRA account, one for just your Covered Calls and one for strategies you are paper trading.

Collar spreads offer enhanced protection in the case of a large stock decline. Unlike a standard stop loss, if your stock gaps down after hours or pre-market you are still protected by the OTM put.

Purchasing deeper OTM puts will cost you less and allow you to retain more of your initial premium from the sold call, but you will have less protection. When creating a Collar Spread, compare the different combinations to find the spread that matches your risk-reward tolerance.

If you are planning on being in the position for several months, use the Option Chain to compare the value of the 4 month or 6 month put. Buying further out in time will lower the annualized cost of the put, but it will put you in a Debit Collar trade for the first couple of months.

If you do not see your favorite strategy listed in the Tab Headings, simply click Other Strategies and select the stock option strategies that you wish to view. We generally show 8 of the 23 strategies supported on the site.

Covered Puts are the reverse of a Covered Call. The Covered Put trade will yield a profit when the stock drops.

• In a 'moderate' Covered Put an investor will short the stock and sell a put strike right at the short put strike price.
• In a 'conservative' Covered Put an investor will short the stock and sell a put that is one or more strikes above the short stock price (In-the-Money).
• In an 'aggressive' Covered Put an investor will short the stock and sell a put that is one or more strikes below the short stock price (Out-of-the-Money).
  

Many investors are using Naked Puts as a means to purchase shares of stock at a discounted price.

When analyzing a credit spread be aware of your risk-reward tolerance. Deeper Out-of-the-money credit spreads will yield a lower return but have a higher protection and higher probability of being successful. At-the-Money credit spreads will offer a high return but a lower probability of success.

You may be able to gain $0.10 or $0.20 cents of profit by changing a 5-point spread into a 10-point spread. Keep in mind that you will not only increase your reward but you will also double your risk.

When you enter into a credit spread your market value will be slightly negative due to the bid-ask spread on the long and short option. Be wary of options with a wide bid-ask spread as your liquidation value may be low if you have to close the position early. Also, options with a higher bid-ask spread tend to have low volume or high implied volatility (higher risk).

If the underlying starts to go against you, buy back the short option to avoid a large loss. If you think the stock will continue to go the opposite direction hold the long option and let it appreciate.