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Option Volatility and Pricing: Advanced Trading Strategies and Techniques, 2nd Edition, 2nd Edition by Sheldon Natenberg

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 4

Expiration Profit and Loss

The trader who enters an option market for the first time may find himself subjected to a form of contract shock. Unlike a trader in equities or futures, whose choices are limited to a small number of instruments, an option trader must often deal with a bewildering assortment of contracts. With several expiration months, with multiple exercise prices available in each month, and with both calls and puts at each exercise price, it is not unusual for an option trader to be faced with what at first seems like an overwhelming number of different contracts. With so many choices available, a trader needs some logical method of deciding which options actually represent profit opportunities. Which should he buy? Which should ...

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