Options Mailbag: How to Trade 'Em, How to Win

In an attempt to avoid carpal tunnel syndrome and hopefully reach those too bashful to email me, I am rebooting the weekend edition of the Options Mailbag in which I answer reader questions. I'm going to begin this 2.0 version by addressing the most frequently asked question -- namely, "Where can I find educational resources and learn more about options?"

But before I dive into that, for those who want some more reading material, I'll direct you to the Archives of Options Forum, which was the first iteration of this Mailbag, which ran from its launch in January 2003 though 2005.

This link provides more than 100 articles in which I answered readers' questions, so you have a fair amount to chew on through next week. I'm glad this will once again become a weekly feature because there are always new questions, variations on answers and, of course, new readers encountering a new market environment.

Get Smart

As I mentioned, the most frequently asked questions are requests for where to find educational resources. For those are still not afraid to click after I stuck that link to 100 articles above, I suggest taking a look at this article. It contains resources including books, software and educational Web sites and tools that are very useful no matter what your knowledge of options.

But in short, one of the best starting points is the Option Institute Council Web site. It has a host of educational materials, such as a FAQ section, an explanation of basic terminology and trading strategies, and recent book recommendations and software. But probably the best feature is that they have the friendliest staff who will answer specific questions. Just dial 1-888-678-4667 and tell them that Steve sent you. Anyone who has gotten me on the phone knows I'm a surly son of gun.

They will let you know what happens to your options during a merger or special dividend, whether it be MicrosoftMSFT, or the more-recent merger of Global Santa FeGSF with Transocean RIG.

Other great educational sites -- aside from TheStreet.com and my Options Alerts newsletter, of course -- include Optionetics, RedOptions and SpreadTrade Systems.

Cover-to-Cover Book Review

As far as books, the links above provide five or six of my favorite titles, but we're going to focus on Larry McMillans' New Insights Into Covered Calls Writing because covered calls or buy-writes are the second most frequently asked question.

A covered call or buy-write is a position that consists of owning stock and selling short an equal number of related call options. For example, if one owns 1,000 shares of Apple AAPL, one might want to sell 10 March $130 call options. Because one owns the underlying stock, the short calls are considered covered, or present a limit risk.