Building Winning Trading Systems with TradeStation®, + Website, 2nd Edition

CHAPTER 10

Options: Introduction and Strategies

We wanted to include a chapter on options because they are yet another weaponthat can be included in one's trading arsenal. Options are confusing to mosttraders and, therefore, are overlooked. In Part A of this chapter, professional programmer Len Yates clears up the confusion and introduces several options strategies. Coauthor John Hill follows up in Part B and reveals some of his real-life options strategies and trades. The ideas that are presented here can be used with most options analysis software.

PART A: GETTING STARTED WITH OPTIONS TRADING

By Len Yates

Being from the Chicago area, host to some of the world's largest options exchanges, I know or encounter many people whose work is related to options trading. So I have the advantage of being surrounded by plenty of locals who are familiar with options and how they work. Still, there are likely even more people unfamiliar with options.

During the course of many social engagements, I invariably end up leading a discussion on options and what options are. Without even finishing my standard overview, I am invariably met with a response such as, “Well, that sounds too complicated for me,” from a befuddled listener. This usually leads me to the snack table because I don't want to make any party listen to what might be to them an arcane subject.

But what I want to say, and sometimes do, is that options are not really that complicated if you're committed to learning the terminology ...