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Introduction to Trading and Investing with Options (Collection)

Name: Introduction to Trading and Investing with Options (Collection)
ISBN: 9780132657914

by Guy Cohen, W. Edward Olmstead, Michael C. Thomsett

January 2011

Beginner

800 pages

23h 56m

English

Pearson

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Title Page
Contents
Options Made Easy: Your Guide to Profitable Trading
DedicationContentsAcknowledgmentsAbout the AuthorExecutive SummaryPrefaceChapter 1. Introduction to OptionsCriteria for Successful InvestingRisk Profile ChartsThe Definition of an OptionThe Valuation of OptionsIntrinsic and Time Value for CallsIntrinsic and Time Value for PutsThe Seven Factors that Influence an Option's PremiumRisk Profile Charts for Call OptionsRisk Profile Charts for Put OptionsMemory Tips for Long and Short Calls and PutsBasic Risk Profiles SummaryChapter 1 Major Learning PointsChapter 2. Into the MarketplaceHow to Read Option PricesOption ContractsOption ExchangesOption Expiration DatesExercise PricesOption Ticker SymbolsMarginPlacing Your Trade OrderTypes of Order in the MarketTime Limits with Trade OrdersAlways Have a STOP in Mind Whenever You Make a TradeTrading TipsLeverage and GearingA Brief Introduction to Delta (Hedge Ratio)Chapter 2 Major Learning PointsChapter 3. The Basics of Fundamental AnalysisPast History and ManagementNews and ResultsSentiment and ExpectationsThe Wider EconomyEconomic Indicators to Watch (USA Only)BondsSupply and DemandCorporate FundamentalsKey Financial TermsKey Financial Figures and RatiosSearch Criteria and Screening Filters for FundamentalsCommon Sense and Being AlertChapter 3 Major Learning PointsChapter 4. The Basics of Technical AnalysisThree Ways to View Price PatternsBasic Chart PatternsSupport and ResistanceDouble and Triple Tops and BottomsHead and ShouldersReverse Head and ShouldersConsolidations—Pennants, Triangles, and WedgesFibonacci RetracementsElliott WaveGann LevelsGapsVolumeTechnical Analysis IndicatorsMoving AveragesMoving Average Convergence Divergence (MACD)StochasticsThe Relative Strength Index (RSI)Different Time FramesMore Technical Analysis TerminologyChapter 4 Major Learning PointsChapter 5. Two Popular Strategies and How to Improve ThemThe Synthetic CallThe Covered Call (Covered Write or Buy Write)The Collar (or Protected Buy-Write)Chapter 5 Major Learning PointsChapter 6. An Introduction to the GreeksThe GreeksDelta ΔGamma ΓTheta θ
Vega K (also known as Kappa or Lambda)
Rho PChapter 6 Major Learning PointsChapter 7. Bull Call Spreads and Bull Put SpreadsBull Call SpreadsBull Put SpreadsAdvantages of Spreads—A SummaryChapter 7 Major Learning PointsChapter 8. Two Basic Volatility StrategiesStraddlesStranglesChapter 8 Major Learning PointsChapter 9. Two Basic Sideways StrategiesButterfliesCondorsComparison Between the Butterfly and the CondorChapter 9 Major Learning PointsChapter 10. Trading and Investing PsychologyMyths and RealitiesTips and Good HabitsYour Optimal MindsetMoney Management and Rule MakingChapter 10 Major Learning PointsChapter 11. Putting It All Together—A Call to ActionStep 1—Choose Your Favored Strategies (Keep It Simple!)Step 2—Set Your FiltersStep 3—Designing Your Trading Plan for Each Entry and ExitChapter 11 Major Learning PointsChapter 12. Stock Futures and Options Strategies (Bonus Chapter)Futures PricingStock Futures and Options StrategiesAppendix I. Strategy TableAppendix II. GlossaryReferences and Recommended ReadingIndexFinancial Times Prentice Hall Books
Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks
ContentsAcknowledgmentsAbout the AuthorPrefaceSection I Basic Concepts1 IntroductionWhy Options?The Basic Concept of OptionsMajor Differences Between Stocks and OptionsA Detailed Explanation of OptionsComments2 Option SelectionWhat Is a Cheap Option?Selecting a CallOverall EvaluationSelecting a Put3 Entering and Exiting Option TradesEntering a TradeExiting a Trade4 The GreeksDeltaThetaGammaVegaRho5 Risk GraphsSingle Option TradeMultiple Option TradeComments6 LeapsComments7 Assignment AnxietyCommentsApplications8 Broker SelectionTypes of BrokersCommissionsTrading PlatformMargin and Trading LimitationsLive Broker AssistanceComments9 Miscellaneous TipsTime Is MoneyTrading with the TrendRisk Capital for Options TradingTracking TradesAnticipating EventsReal-Time QuotesMarket Orders with OptionsOptions CalculatorSection II TRADING STRATEGIES10 Vertical SpreadsDebit Vertical SpreadsCredit Vertical Spreads11 Event-Producing Credit SpreadsComments12 Calendar SpreadsThe Rollout ManeuverComments13 Advanced Calendar SpreadsVolatility Skew TradesRatio Calendar Spread TradesDeep-in-the-Money LEAPS Put Calendar SpreadsDiagonal Calendar Spread Trades14 Covered CallsAn Idealized TradeA Realistic TradeCovered Call vs. Naked PutComments15 Straddles and StranglesThe Straddle TradeThe Strangle Trade16 Stock Repair and Stock EnhancementStock Repair StrategyStock Enhancement Strategy17 Married PutsComments18 CollarsComments
19 Advanced Collars
Comments20 Naked Option WritingThe Risk of Naked Option WritingAcquiring Stock with Naked Puts21 Stock SubstitutesSynthetic Long StockDeep-in-the-Money PutDeep-in-the-Money Call22 BackspreadsComments23 Butterfly SpreadsStandard Butterfly TradeButterfly Trade with AdjustmentsUnbalanced Butterfly Trade24 Iron Condors and Double DiagonalsThe Iron Condor TradeThe Double Diagonal TradeComments25 An End-of-Year Tax StrategyTax Code RestrictionsQualified Covered CallsCommentsSection III SPECIAL TOPICS26 Day Trading an Index with OptionsComments27 Delta-Neutral Trading28 Theory of Maximum Pain29 Implied Volatility and the Black-Scholes FormulaHistorical BackgroundImplied VolatilityApplications of Implied VolatilityComments30 The Put-Call Parity RelationshipCalls Cost More Than PutsApplications of Put-Call ParityIndex
Options Trading for the Conservative Investor: Increasing Profits without Increasing Your Risk
Contents
Acknowledgments
About the Author

Preface
The Elusive Goal: Low Risk and High Yield
1. Setting the Ground Rules
The Ground RulesA Model Portfolio
2. Option Basics
The Workings of Option ContractsLong and ShortCalls and Call StrategiesPuts and Put StrategiesListed Options and LEAPS OptionsCoordinating Strategies with Portfolio GoalsOption and Stock Volatility: The Central Element of RiskValuable ResourceTrading Costs in the Option AnalysisTax Rules for Options: An OverviewThe Importance of Professional Advice and Tax Planning
3. Options in Context
The Nature of Risk and RewardPerceptions about OptionsShort Positions: Naked or CoveredMargin Requirements and Trading RestrictionsReturn Calculations: Seeking Valid ComparisonsLong-Term Goals as a Guiding ForceExercise as a Desirable Outcome
4. Managing Profits and Losses
Your Conservative DilemmaManaging Profits with OptionsOvercoming the Profit-Taking ProblemManaging the Inertia ProblemTaxes and Profits
5. Options as Cash Generators
The Covered Call ConceptExamples: Ten Stocks and Covered CallsSmart Conservative Ground RulesA Conservative ApproachTax Ramifications of Covered CallsRolling Forward and Up: Exercise AvoidanceThe Exercise Acceptance Strategy
6. Alternatives to Stock Purchase
Leverage and OptionsThe Long-Call Contingent-Purchase StrategyThe Covered Long CallShort Puts and Contingent PurchaseRescue Strategy Using CallsRescue Strategy Using PutsCovered Calls for Contingent Sale
7. Option Strategies in Down Markets
Thinking Outside the Market BoxThe Long Put: The Overlooked OptionShort Puts: A Variety of StrategiesComparing Rates of Return for Dissimilar Strike PricesUsing Calls in Down MarketsEvaluating Your Stock PositionsStock Positions and Risk EvaluationOptions and Downside RiskOption Planning with Loss Carryover
8. Combination Conservative Techniques
Spread TechniquesStraddle TechniquesLong or Short PositionsTheory Versus PracticeTax Problems with Combination StrategiesThe Ultimate High-Return StrategyExamples of the Strategy in PracticeOutcome ScenariosThe Augmented Strategy: A Short StraddleRescue Strategies
9. Stock Selection and the Option Contract
Remembering Your Conservative Profile as a PriorityDangers and Pitfalls in Using OptionsTemptation to Select Most Volatile StocksCreating Sensible Conservative StandardsMaintaining Fundamental ClarityThe Importance of Taxes in the Option EquationOption Volatility to Judge Stocks
Appendix: Option Trading Strategies
Glossary
Put Option Strategies for Smarter Trading: How to Protect and Build Capital in Turbulent Markets
ContentsAcknowledgmentsAbout the Author
Introduction: Surviving in Volatile and Falling Markets
1. The Flexible Nature of Options: Risks for All Levels
Key PointTerms of OptionsKey PointKey PointKey PointKey PointValuation of OptionsKey PointKey PointKey PointKey PointDividends and PutsKey PointKey PointKey PointKey Point
2. Puts, the Other Options: The Overlooked Risk Hedge
Puts as Insurance for Paper ProfitsKey PointKey PointKey PointKey PointKey PointKey PointKey PointRisk Considerations: Types of RisksKey PointKey PointKey PointKey PointKey PointKey Point
3. Profit-Taking Without Selling Stock: An Elegant Solution
The Insurance PutKey PointKey PointValuable ResourcePicking the Best Long Put: Time, Proximity, and CostKey PointKey PointBuying Puts Versus Short-selling StockKey PointKey PointRolling into Spreads to Offset Put LossesKey PointKey PointBuying Puts to Protect Covered Call PositionsKey PointKey PointKey PointTax Problems with Long PutsKey PointKey Point
4. Swing Trading with Puts: Long and Short or Combined with Calls
Key PointBasics of Swing TradingKey PointKey PointA Swing Trading Method: Long and Short StockKey PointThe Alternative: Using OptionsKey PointKey PointKey PointKey PointVariations on the Options Swing Trading MethodKey PointKey PointKey PointMultiple Contract StrategiesKey PointKey PointKey PointKey PointKey Point
5. Put Strategies for Spreads: Hedging for Profit
Bear SpreadsKey PointKey PointBull SpreadsKey PointCalendar SpreadsKey PointKey PointDiagonal Spread StrategiesKey PointKey PointKey PointCombination Put SpreadsKey PointKey PointKey PointKey PointKey PointKey Point
6. Put Strategies for Straddles: Profits in Either Direction
The Long StraddleKey PointKey PointThe Short StraddleKey PointKey PointKey PointStrangle StrategiesKey PointKey PointKey PointCalendar StraddlesKey Point
7. Puts in the Ratio Spread: Altering the Balance
Ratio Put SpreadsKey PointRatio Put Calendar SpreadsKey PointThe Backspread (Reverse Ratio)Key PointKey PointRatio Calendar CombinationsKey PointThe Diagonal BackspreadKey PointShort Ratio PutsKey Point
8. Puts as Part of Synthetic Strategies: Playing Stocks Without the Risk
Synthetic Stock StrategiesKey PointKey PointKey PointSynthetic Strike SplitsKey PointThe Synthetic PutKey Point
9. Puts in Contrary Price Run-ups: Safe Counter-Plays During Bear Markets
Option Valuation and VolatilityKey PointKey PointKey PointVolatility TradingKey PointFactors Affecting Option ValueKey PointKey PointKey PointKey PointSpotting the Overall TrendKey PointReliance on Stock-based Technical AnalysisKey PointKey PointKey PointKey Point
10. Uncovered Puts to Create Cash Flow: Rising Markets and Reversal Patterns
The Uncovered Short PutKey PointKey PointKey PointEvaluating Your Rate of Return from Selling PutsKey PointKey PointCovered Short StraddlesKey PointKey PointKey PointCovered Short SpreadsKey PointKey PointKey PointRecovery Strategies for Exercised Covered Straddles and SpreadsKey PointKey PointShort Puts in Rising Markets: One-Sided Swing TradingKey PointKey Point
Glossary
Index
Financial Times Press

Content preview from Introduction to Trading and Investing with Options (Collection)

8. Puts as Part of Synthetic Strategies: Playing Stocks Without the Risk

Anyone who hesitates to buy stock in a volatile market may want to consider setting up synthetic strategies as an alternative. A synthetic is any position that duplicates the performance of stock, without the market risk or even the requirement to purchase shares.

A synthetic position performs like the stock position it imitates. This applies to either long or short stock.

Synthetic Stock Strategies

It is entirely possible to leverage your capital to the extreme with synthetic positions. Synthetic long stock is an options position that very closely approximates movement in the stock, but for practically no cost, or in some cases even a credit. The outcome of the option ...

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The Option Trader’s Hedge Fund: A Business Framework for Trading Equity and Index Options

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Introduction to Trading and Investing with Options (Collection)

by Guy Cohen, W. Edward Olmstead, Michael C. Thomsett