The Complete Guide to Option Strategies: Advanced and Basic Strategies on Stocks, ETFs, Indexes, and Stock Indexes

PART FOUR

Comparing Underlying Instruments

It has been stated often in this book that the option principles that are demonstrated for a stock can be applied to options on an ETF, index, and stock index futures. Now it is time to move to the next level and see how the option principles described previously can be applied to other underlying instruments. Chapter 23 compares underlying instruments, Chapter 24 covers ETFs, Chapter 25 covers stock indexes, and Chapter 26 covers stock index futures.

By understanding how to trade options on a number of underlying instruments, you are able to pick the instrument that fits you best; for example, if you are interested in commodities, there are ETFs available, and if you are interested in index trading, there are indexes available. Understanding a number of underlying instruments can enable you to shift back and forth among U.S. markets, emerging markets, and commodities, depending on whether they are rising, moving sideways, or falling. In such a case, the U.S. stock market may be in a temporary downturn, there may be a bull market in emerging markets and/or commodities, or vice versa. Of course, you do not need a bull market to make money trading options; instead, you can trade a declining or sideways market. It is to your advantage to know how to trade multiple products so that you can execute a strategy at a moment’s notice. Trading options on ETFs, indexes, and stock index futures can provide an opportunity to trade among a wide spectrum ...