The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard Of and What You Can Learn From Them

Chapter 2. Options Apostle

Investor: Bob Krebs

Date of Birth: July 24, 1952

Hometown: Orange County, CA

Personal Web Site: None

Employment: Engineer, computer storage business

Passions/Pursuits: Bible study, jazz lover, coaching his daughters' speech and debating team, budding novelist

Investment Strategy: Income investing for total return using put and call options

Brokerage Accounts: Charles Schwab, Fidelity, E*Trade

Key Strategy Metric: Yield

Online Haunts: www.valueforum.com

Best Pick: Cisco, Up 800 percent

Worst Pick: Deep Sea Supply Plc., Down 80 percent

Performance Since September 2005: Cumulative return of 287 percent versus 11 percent for the S&P 500^[6]

For many of us investing in stocks is fairly one-dimensional. Buy stocks of companies you think will appreciate and, ideally, sell them after they've gone up in price. Some people trade frequently, but most are buy-and-hold investors. Few are good at either of these strategies. Only a small number of investors ever venture into such exotic tactics as shorting stocks or trading options. Most are either too afraid of the risks involved or bewildered by the additional math skills required to execute these strategies well.

Proficiency in mathematics was never an issue for Bob Krebs, an electrical engineer and next-generation microchip designer for Western Digital. Still, investment success did not come overnight for Krebs. He describes himself as a 34-year student of investing and markets. His experience includes investing in California's ...