3. Pure Options Trading: Building Your Own Trade

“Things should be made as simple as possible, but not any simpler.”

—Albert Einstein

Stock traders who don’t know the versatility of options merely use options as a hedge to their portfolio. In fact, for an options trader, stocks are secondary and are the adjunct to the options portfolio.

Options available for any underlying stock in the same month and different months permit you to create complex strategies to lessen risk exposure or to enhance gains. This chapter examines how trades are structured, and the next chapter puts all the pieces together to show how strategies can be enhanced and improved.

There are two sides to any trade: the buy side and the sell side. Buying is about giving and selling ...

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