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Essential Option Strategies

Book Description

Learn the ins-and-outs of options trading with clear, practical guidance

Essential Option Strategies is an introductory guide to options trading, designed to help new options traders better understand the market and the potential opportunities that exist. This book is designed to bring you up to speed with current practices and help you implement your own option trading strategies. You'll create a plan, track indicators, and understand underlying instruments, then apply that central investing knowledge directly to the options market. The discussion on pricing determinants and probabilities uses an intuitive approach to complex calculations, providing clear examples with no advanced math required, and extensive explanation of spreads, butterflies, and condors brings advanced strategies down to earth. Easy-reference appendices clarify the Greek terms and technical analysis charts, while focused discussion and expert insight throughout provide a highly informative crash course on options trading. 

Options trading has undergone a rapid evolution beyond stocks and commodities into asset classes including fixed-income, precious metals, energy, and more. This book helps you build a solid foundation in the fundamentals, giving you a knowledge base that applies no matter how the instruments change. This book is designed to help you:

  • Understand the options market inside and out
  • Avoid common mistakes
  • Learn some basic positions, and trades
  • Read charts and interpret probabilities

Once the domain of the elites, the options market has been thrown wide open thanks to real-time price quotes, through brokerages, and the free flow of information online. The process of buying and selling options contracts is faster and more efficient than ever, and Wall Street is facing stiff competition from independent analysts and financial websites. As much as the market has changed, the fundamentals are the same—and Essential Option Strategies aims to provide expert guidance throughout the learning process.

Table of Contents

  1. Title Page
  2. Copyright
  3. Dedication
  4. Foreword
  5. Preface
  6. Acknowledgments
  7. About the Author
  8. Part I: Getting Started in Investing
    1. Chapter 1: The Opening Bell
      1. Probabilities
      2. Getting Started
      3. Research
      4. Data
      5. Charts
      6. Commissions and Fees
      7. Virtual Trading Platforms
      8. Summary
      9. References
    2. Chapter 2: First Days of Trading
      1. Brief History of Stock Market Averages
      2. Key Market Indexes Today
      3. The Volatility Index
      4. Futures
      5. The Bond Market
      6. Fed Watch
      7. Economic Indicators
      8. Earnings
      9. Find Your Niche
      10. Summary
      11. References
    3. Chapter 3: Know the Underlying
      1. Where Do Options Trade?
      2. Stock Talk
      3. Exchange-Traded Funds
      4. Short Selling
      5. On the Margin
      6. Summary
      7. References
    4. Chapter 4: Avoiding Mistakes
      1. Position Size
      2. Volume and Liquidity
      3. Order Entry Techniques
      4. Understand Risk
      5. Summary
      6. References
  9. Part II: The Options Market
    1. Chapter 5: Options Basics
      1. Stock Options
      2. Option Value
      3. Exercise and Assignment
      4. Volume and Open Interest
      5. Index Options
      6. Summary
      7. References
    2. Chapter 6: Introduction to Call Options
      1. Call Options versus Stock
      2. Risk and Reward of Long Call
      3. Real-World Example
      4. Short Calls
      5. Index Call Options
      6. Summary
      7. Reference
    3. Chapter 7: Introduction to Put Options
      1. Long Puts versus Short Selling
      2. Risk and Reward
      3. Real-World Example
      4. Protective Puts
      5. Index Put Options
      6. Summary
      7. References
    4. Chapter 8: Components of Options Prices
      1. Delta and Other Greeks
      2. Strike Price
      3. Theta and Time Decay
      4. Vega and Implied Volatility
      5. Dividends
      6. Rho and Interest Rates
      7. Put-Call Parity
      8. Summary
      9. References
    5. Chapter 9: Probabilities
      1. Probabilities 101
      2. Probability of Profit
      3. Probability of Touching
      4. Example
      5. Delta to Measure Probabilities
      6. Summary
      7. References
  10. Part III: Strategies and Positions
    1. Chapter 10: Covered Calls
      1. The Covered Call
      2. Example
      3. Summary
      4. References
    2. Chapter 11: Cash-Secured Puts
      1. Short Puts
      2. Example
      3. Summary
    3. Chapter 12: Long Vertical Spreads
      1. Bull Call Spread
      2. Example
      3. Bear Put Spread
      4. Example
      5. Summary
    4. Chapter 13: Short Vertical Spreads
      1. Short (Bull) Put Spread
      2. Example
      3. Short (Bear) Call Spread
      4. Example
      5. Summary
    5. Chapter 14: Calendar Spreads
      1. Call Calendar Spread
      2. Example
      3. Put Calendar Spread
      4. Example
      5. Summary
    6. Chapter 15: Butterfly Spreads
      1. Butterfly Spread
      2. Example
      3. Iron Butterfly Spread
      4. Example
      5. Summary
    7. Chapter 16: Condor Spreads
      1. Condor Spread
      2. Example
      3. Iron Condor Spread
      4. Example
      5. Summary
    8. Chapter 17: The Close
      1. Risk Management
      2. Options Orders
      3. Using Options to Reduce Capital Commitment
      4. Rolling with Spread Trades
      5. Investing and Social Media
      6. Final Thoughts
  11. Appendix A: The Greeks
    1. Delta Defined
    2. Delta Neutral
    3. Gamma
    4. Theta
    5. Vega
    6. Rho
    7. Reference
  12. Appendix B: Strategy Recap
    1. Long Call
    2. Short Call
    3. Long Put
    4. Protective Put
    5. Covered Call
    6. Collar
    7. Cash-Secured Put
    8. Long Call Spread
    9. Long Put Spread
    10. Short Call Spread
    11. Short Put Spread
    12. Call Calendar Spread
    13. Put Calendar Spread
    14. Call Butterfly Spread (Long)
    15. Put Butterfly Spread (Long)
    16. Iron Butterfly
    17. Call Condor Spread (Long)
    18. Put Condor Spread (Long)
    19. Iron Condor
    20. Quick Strategy Guide
  13. Appendix C: Charts and Volatility Studies
    1. Stock Charts 101
    2. Time Frames
    3. Volume and Volatility
  14. Glossary
    1. Index
  15. End User License Agreement