Chapter 1 - Getting Started

If you're ready to get started, then you’re ready to start making some money with shares you already own.  You have your ESPP Employee Stock Purchase Program shares in an online brokerage account, like E*TRADE or Fidelity.  You should have at least 100 shares since stock options are base on one option controls 100 shares.  So you will be selling one covered call for each 100 shares you own.  And now you are ready to learn about covered calls.

Ok, let's get started.  First you need to learn the key ingredients to making money with shares in your ESPP account.  You need to learn about stock option trading.  Option trading is a derivative to the normal stock market.  Everyone knows about "buy low and sell high"...  When you buy a stock, you want to buy at the lowest price and sell at the highest price.   The difference between those prices gives you a profit. 

"Buy low and sell high" is a simple concept that most everyone is aware of.  You might also be aware of the derivatives market.  It's like the back side of the stock market.  We see the folks on the floor of a major stock market all wanting to "buy low and sell high" but what we may not realize is that there are many traders who can profit from stocks that don't move much in price, or maybe don't always rise. 

Imagine a betting parlor where people are betting on which horse is going to win first.  If you bet on the winning horse, then you win the most.  What if there was a side bet that let you pick the winning time, not the winning horse.  It doesn’t matter which horse would win as long as you guessed the correct winning time it took a horse to win the race.  That would be a derivative of the main bet.

Stock options are derivatives of the main "buy and hold" stock trading.  You are betting on what the price will be at a set date.  Just like the gamblers betting on the winning time and not the winning horse.  You are betting that you can predict what the price of the stock will be at a date in the future.

Start here:  http://esppcoveredcalls.blogspot.com/2012/01/use-your-espp-employee-stock-purchase.html