CHAPTER 7
Options-Based Technical Indicators for Stock Trading
BERNIE SCHAEFFER
Equity options have come a long way since they were first listed on exchanges in 1973. Beyond the explosive growth in the volume of options trading during this period, which speaks for itself, options have become a risk-management tool as well as a tool for speculation for a broad spectrum of market players, from modestly capitalized individual investors to hedge funds.
In basic terms, the world of listed options consists of call options and put options. The buyer of an equity call option has the right but not the obligation to buy shares of a company, referred to as the underlying stock, at a specified price (called the strike price) for a specific period of time, ...
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