Chapter 11

Options: The Right to Buy or Sell at a Fixed Price


Bullet Understanding the specifics of options

Bullet Feeling comfortable with an options chart

Bullet Calculating the maximum loss, maximum gain, and break-even points

Bullet Discovering more about option rules

Welcome to the wonderful world of options. I’m sure you’ve heard stories about the difficulty of options. Put your mind at ease — I’m here to make your life easier. Maybe I’m a little warped, but options are my favorite part of the SIE exam!

You don’t have to do a lot of calculations relating to options on the SIE, but the ones that you do have to do are relatively simple. More of the option questions on this exam are about understanding the terminology and rules. But, in this chapter I make facing any math questions you may encounter as simple as possible for you.

Tip There are certainly many more complex options strategies such as straddles, spreads, combinations, and so on. However, you won’t need to calculate any of them on ...

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