Winning with Options: The Smart Way to Manage Portfolio Risk and Maximize Profit

CHAPTER 4

APRIMERON

OPTIONS TRADING

‘‘The instability of the economy is equaled only by the instability of

economists.’’

—John Henry Williams, in the New York Times, June 2, 1956

S

ix basic strategies can help you to work within your port-

folio and make profitable use of options. The strategies are

(1) long options, (2) covered calls, (3) uncovered calls,

(4) uncovered puts, (5) rolling strategies, and (6) insur-

ance strategies. Each has a specific and unique purpose.

Understanding the risks of each, the attributes of each,

and the trading steps involved in each provide you with

the tools you need to structure an option-based portfolio

management system.