Covered call writing is our favorite strategy for public investors. It is conservative and provides added safety for your portfolio. One of the limiting factors has been the requirement to own individual stocks before being able to sell covered calls. When you sell a call option, it grants the other party the right to buy your specific stock for the strike price at any time before the option expires. When you own the stock, it is an easy matter to deliver the stock to the option owner, if and when he exercises the option.

If you own a traditional mutual fund, it is not possible to find a call option to sell that exactly mimics your holdings. If you are ever assigned on one or more call options, you would not own the specific stocks that must be delivered to the call exerciser. Most brokers do not allow you to sell call options when owning a mutual fund, because the fund cannot be delivered in the event you are assigned on one or more options. Brokers consider such calls to be uncovered, and very risky. We agree, it would be a poor strategy to attempt to sell call options when owning a traditional mutual fund.

Today, there is an opportunity to write calls when owning "mutual funds." The existence of ETFs, or Exchange Traded Funds, now allows you to buy a fund and write a call option. Because these options are exercisable into the exact ETF you own, you can simply deliver 100 shares of the fund, if assigned on an option. There is no special risk associated with this exercise transaction, as the process is identical to the process of being assigned on an equity option. What is an ETF? It is a managed portfolio of stocks that either exactly mimics or approximately resembles a specified index (such as the Russell 2000 or the Standard & Poors 500), or sector (such as energy or biotechnology).

Thus if you want to have a stock holding in a particular sector of the market, you can do so, if there is an ETF for that sector. You can use our recommended strategy, and write a call option against that ETF, if it is one of the ETFs on which call options are available .

The American Stock Exchange is the primary source of these ETFs, although there are some that trade on other exchanges. Options are not available on all ETFs, but you can find a list of those funds on which options are traded at the Amex web site. They make it needlessly difficult to find the list. For your convenience, we provide the list of Amex ETFs on which options are traded below. New ETFs are always being added, so this list is not always up to date.

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Options are available on these ETFs

Access to Loans Essential in Volatile Economy, Markets

Underlying Name	Symbol	Option Symbol(s)
FORTUNE 500 Index Tracking Stock	FFF	FFF
FORTUNE e-50 Index Tracking Stock	FEF	FEF
iShares Dow Jones US Financial Sect	IYF	IYF
iShares Dow Jones US Technology	IYW	IYW
iShares Dow Jones US Telecommunicat	IYZ	IYZ
iShares Nasdaq Biotechnology	IBB	IBB
iShares Russell 1000	IWB	IWB
iShares Russell 1000 Growth	IWF	IWF
iShares Russell 1000 Value	IWD	IWD
iShares Russell 2000	IWM	IWM
iShares Russell 2000 Growth	IWO	IWO
iShares Russell 2000 Value	IWN	IWN
iShares Russell 3000	IWV	IWV
iShares S&P MidCap 400	IJH	IJH
iShares S&P MidCap 400 BARRA Growth	IJK	IJK
iShares S&P MidCap 400 BARRA Value	IJJ	IJJ
MidCap SPDRS	MDY	DIX, KXN, LSP, MDY, OMF
Nasdaq-100 Index Tracking Stock	QQQ	LRI, OZC, QAV, QQQ, QUE, QVQ, VZQ, YQQ
Select Sector SPDR-Basic Industries	XLB	XLB
Select Sector SPDR-Consumer Service	XLV	LJO, OJV, XLV
Select Sector SPDR-Consumer Staples	XLP	OJS, XLP
Select Sector SPDR-Energy	XLE	LJE, VJE, XLE
Select Sector SPDR-Financial	XLF	KXU, OJO, XLF
Select Sector SPDR-Industrial	XLI	LJL, VJD, XLI
Select Sector SPDR-Technology	XLK	CAX, LJK, OGH, OJY, PJY, XLK
Select Sector SPDR-Utilities	XLU	KDG, OJW, XLU
Vanguard Total Stock Market VIPERs	VTI	VTI