Generate Thousands in Cash on your Stocks Before Buying or Selling Them: Third Edition Hardcover – June 30, 2007

This book is awesome.There are many many things described in this book : selling calls and puts on long-term investments, how to maximise premiums received, using the CMF, profiting from short squeezes, short-term trading, Japanese candlesticks, chart patterns, and much more.I really enjoyed this book, but two things bother me a little :1. Please note how the profits are calculated on the covered calls examples ; it can be misleading : a covered call position is somewhat a "hedged" position, where money made on the call is money lost on the stock.So when the author says it generates more than XX% return annually on the various examples, he only speaks about the option selling process, NOT the money lost on the stock. When you compute the global position (options + stocks), the returns are not that good.One of the striking examples is the MCK example beginning page 31 : 500 shares were purchased at $93 the 9/25/1998 and sold at $34.5 the 02/08/2001 with a $220 profit... an intial investment of $46500 producing only $220 profit in 2.5 years is not that impressive ;o)2. The section on risk management is very very thin (it's almost always a roll-up or roll-down).When you sell naked puts on a stock that goes straight down, it can hurt badly ... at the end of the book he adresses this problem in transforming the naked put into a bull put credit spreadAnother strategy consists in selling put options on a stock, and using part of this sale to purchase the stock : this way, you generate profits, without spending your own cash ... but if you're wrong ..... you're ruined ! I haven't found practical ways to reduce this risk.Apart from those two things, the book is very very good.It's definitely a must read.EDIT 05/27/2011 : Since my first reading of this book, I've read a lot of options book. All say : if you're bullish, do this ; if you're bearish, do that ; if you're neutral, do that, etc ...What really shines in this book is that it does not assume that you already have an opinion on the underlying. Instead, the book presents methods to decide if a stock is going to rise or fall (gives specific setups that work well). This book does not present options strategies, but instead complete trading systems : a "long term" system combining long stock positions with short options (the real "meat" of the book, for me), and different ways to trade short term (although not day trading), which are more common.It's probably one of the best trading books that I have ever read ... and I've read many !It would be even more perfect with a more detailed chapter on risk management (specially naked options)

Strategies in this book have consistently added between $4000 to $6000 per month to my $200,000 account month after month. To be objective I must declare that it took me 18 months of learning,practicing and implementing the ideas in this book to achieve this goal.I realized that the difference between achieving mediocre results and exceptional ones is based on mastering two important principles. First- Picking the right stock that offers high premiums, and there are many available in this market. This can be picking a stock near earnings time and taking advantage of post earnings volatility collapse, choosing a stock with normally high volatility, a stock with high vega etc. Second- Picking the right strike price to collect the maximum premium but at the same time reduce risk.The second point of picking the right strike is critical in collecting hefty premiums, and for this reason an important objective for readers of this book is to master the technical analysis sections and learn how to tie those into picking the right stock at the right time to achieve best results. Understanding technical analysis concepts will guide you as to whether you should pick an in the money or out of the money strike to sell puts for example.For illustration purposes, if you consider the VPV reversal or falling rectangle setups mentioned by a couple of other reviewers, it is important to pick the strike near the next resistance due to the power of the setup. This allows you to participate in the stock's advance rather than just collecting time premiums . Also an earnings squeeze offers exceptional opportunity as indicated in the book and as the author mentions you should combine selling puts at the next resistance with using a part of the put premium to buy calls.Each technical setup in this book indicates a specific optimum option trade to reduce risk and maximize profits. Unless you master this point your results will stay mediocre, but still profitable . If you put in the effort to master relating your option trade to the technical behavior of each stock ,as this book demonstrates ,you will be able to belong to the highly profitable one percent of option traders.

Rather than using complex setups trying to cover all practical outcomes in an option trade , the author uses the stock's technical strength and sentiment picture to recommend the most profitable option trades. Applying these concepts alone produced 8-10 percent monthly returns for me.Many important factors, such as short interest, option open interest, option volume skew,put/call ratios, convergence/divergence values , volatility and several others are factored into determining the best and most rewarding option trade.this is a very useful and profitable book but to benefit from it , one needs to get out of the box as a classical option trader and factor in the stock's behavior as an integral part of any option trade. This is where the book excels.In regards to the editing of the book ,I had no problems with it. The charts may not be the best but they are, in my opinion, good enough to follow the concepts and examples. I agree with another reviewer in that the ideas in the book are so useful and profitable that these issues are minor.