Now that I have your attention, I will put on my dog and pony show. By that I mean I will nudge you in the direction of using options in your portfolio. I admit I am biased towards options.

As mature grown traders, we realize options are not the end all be all. They are merely a financial tool that can assist you in achieving your ultimate wealth building goals. Or, at the minimum, preserving your current wealth.

This article isn't intended to be a course on option trading. It is intended to present a specific strategy that just may be appropriate for the type of market that exists today. The specific strategy is something called covered call writing.

Can you actually get rich writing covered calls? The answer lies in the fact that you can make a ton of money with any option strategy as well as lose your trading principal. Option writers are eternally optimistic the path they chose is always the correct path.

We think like that because options are not only powerful but flexible. They allow a trader to achieve a mountain of leverage, make sometimes insane profits whether the market is going up, down or standing still.

They even minimize risk and reduce exposure to the market without giving up gains. The cold hard facts also say options produce greater income than many mutual funds.

The wonderfulness of the Internet is the amount of information available on any topic including options. Fortunately for traders websites exist that offer free training that is extremely intensive. The underlying idea behind offering free is the trader will open an account with the giver or buy the giver's books or DVDs or attend their pricey seminar.

For our purposes we won't do any of that. We'll take the free information, digest it and refine our own option trading strategy. When I was an active stock broker, the firm gave me all the information I needed to be an option guru. That same level of information is available on the Internet.

A note of caution. I am not implying every website with option trading information is above board. You have to do your due diligence as there are a few that over-promise then under-deliver.

This preamble is getting too long. Let's move into the covered call strategy. First, the definition.

A covered call is an options trading strategy which seeks to make a monthly income by selling call options against existing stock holdings.

You may have heard it called a covered buy write or a covered call write. Call it what you will because you won't change the fact it is the options trading strategy most widely taught. It is easy to learn and easy to execute.

The question becomes, when do I use a covered call? The answer becomes when you want to hold onto your position while making an income from it. Some people use it to protect their equity when the stock experiences a slight correction or short term drop in price.

You can consider it rent. You are renting out your shares when the market, in the words of the analysts, is stagnant. The premium you receive is the rent. For traders who hold long term stock positions the rent is the icing on the cake.

A covered call consists of simply writing 1 out of the money contract for every 100 shares of the underlying stock you own. The math is extremely basic. If you have 500 shares, you write 5 out of the money call contracts for example.

Please notice you are writing against shares you already own. You are hedging. You are making money. In this market you might be making a lot of money. I don't know that for sure but screen your portfolio and see what you can do with it.

If you are an options trader you know about strike price. The obvious question is at what strike price do I write my options?

The answer depends on your outlook on the performance of the stock. Read that again. The answer depends on your outlook. Your research and analysis should tell you which strike price works best. You do know your stock, right?

This isn't necessarily the correct answer in your particular situation but it is a fast rule of thumb and a quick way to determine the strike price. Write the call options on the price you expect the stock to peak at.

A fast tutorial on premium for covered call writers. If you already know this information, thank you for reading this far. If you want a refresher or don't know this information, it is offered for your knowledge bank.

The further out of the money the call options are written, the more opportunity there is for the stock to go upwards. This time frame also lowers the premium you will receive on the written call options. You will maximize your profit potential but lessen the profit received if the stock remains stagnant or goes down.

The nearer the money the call options are written, reduces the time for the stock to go upwards. Your premium will be higher from the call options themselves. However, the maximum profit potential decreases but, as a sort of compensation, the profit received if the stock remains stagnant as well as the protection received when the stock goes down becomes higher.

This isn't the only options trading strategy by any means. It is one you may wish to place in your quiver right next to credit spreads or straddles or whatever strategy you decide is right for you. Remember, wise and prudent use of options trading strategies can become one of your wealth building tools.