Chapter 12. Using Options to Earn Income

If you have ever consulted a full-service stockbroker in search of a relatively conservative equity investment strategy, you might have heard about “covered call writing.” This chapter explains how you can use ETF options to reduce your investment risk. However, even though covered call writing is widely touted as a conservative strategy, you will see here why that characterization is misleading. Covered call writing can have a place in your safe investment portfolio, but it is no panacea for stock market risk.

What Are Stock Options?

A stock option (call option) is a legal agreement between two investors in which the call option buyer pays for the right (but not the obligation) to buy a stock from the ...

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