Chapter 9

Getting to Know Different Option Styles

In This Chapter

arrow Understanding index and index option details

arrow Distinguishing option styles

arrow Exercising option rights and meeting obligations

arrow Knowing what to do for expiration

Knowledge is indeed power. That’s why knowing your risk as a trader means that you really understand the market mechanics for the securities you use, as well as the different ways it can hit you with losses. Options present you with a unique challenge because they are leveraged and they come with an expiration date — you need to know how to handle a security that can be volatile and that eventually “goes away.” This chapter focuses on key points about indexes and index options that impact trading. It also addresses exercise style, assignment issues, and other things you need to be wary of going into expiration.

Nailing Down Index Options

Just when you think you’re starting to get a handle on things, the options market throws a curve at you. For example, you can group most monthly listed stock options together when applying strategies or managing ...

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