The options strategist : how to invest and trade equity-related options : effective strategies from basic to advanced options on ETFs and index funds, techniques to protect your investments

Equity options, the all-purpose vehicles that today's smartest investors use to increase profits, reduce risks, or both. Equity options, considered overly complex and aggressive by most investors, are actually among today's most straightforward and easy-to-use investment vehicles. Providing both protection against loss and potential for exceptional profits, they are ideal for virtually any trader or investor. "The Options Strategist" outlines effective and easy-to-follow strategies for incorporating the power of equity options into your trading program.Starting with the basics of options and options trading, it goes on to reveal specific strategies that you can use to: maximize your trading profits in up, down, or sideways markets; protect your portfolio against sudden market declines; take advantage of price swings, regardless of their direction; hedge your corporate stock and/or options against unforeseen events; and, employ advanced options techniques to take your trading success to the next level. It's time that you discovered the many benefits of equity options. Let "The Options Strategist" show you just how easy and profitable options investing can be and provide you with the knowledge and tools you need to give your portfolio the options advantage.Investors of all types, with portfolios of every size, are beginning to realize the protection and profit in equity options. Long seen as a volatile investment designed strictly for gamblers and high rollers, options in fact offer unique advantages to even the most conservative investor and are suitable for rounding out virtually any investment portfolio. "The Options Strategist" tells you everything you need to know to trade and invest with equity options. Whether you use options to aggressively increase trading profits through the power of leverage or conservatively protect the stocks in your portfolio against sudden market reversals, this hands-on, practical guide will introduce you to strategies from basic to advanced, including: buying calls and puts; writing covered calls and puts; writing naked calls and puts; straddles; spreads; strangles; collars; and, combinations.But more than just discussing what to do and how to do it, "The Options Strategist" explains why to do it. Why would an investor buy an option to purchase 100 shares of a stock instead of just buying the stock itself? Why would an investor write calls on shares of stock he or she already owns? Or write both puts and calls on that same stock? This plain-talking guidebook explains the strategic motivation behind each of these examples and dozens more, along with the rewards, risks, best outcomes, and worst outcomes for each. In addition, "The Options Strategist" takes an in-depth look at the theory behind options investing.Option pricing, implied and historical volatility, the Greeks, the Black-Scholes Option Pricing Model: for each of these topics, key questions are asked and answered, central arguments are introduced and analyzed, and specific technical terms are demystified to underscore their practical applications (or lack thereof) for options traders and investors. The result is a guidebook that lays a solid foundation for equity option trading and investing. "The Options Strategist" explains how to use basic techniques for both profit and protection and then explores more advanced aspects for the truly serious student of options trading. It is, in short, today's most comprehensive introduction and rulebook for making equity option trading an integral part of your everyday investing strategy. Copyright......Page 3 CONTENTS......Page 7 INTRODUCTION......Page 11 The Basics......Page 15 Puts and Calls......Page 16 The Other Side of the Option......Page 17 Vocabulary and Definitions......Page 18 Options Pricing: The Basics......Page 24 Buying Call Options......Page 25 Buying Put Options......Page 29 Writing Options: Covered and Uncovered......Page 33 Writing Covered Calls......Page 34 Writing Covered Puts......Page 37 The Building Blocks......Page 41 CHAPTER 2 BASIC INVESTMENT STRATEGIES......Page 43 Possible Outcomes......Page 44 Covered Writing Against Losing Positions......Page 45 The Naked Covered Writer......Page 46 The Buy/Write......Page 47 Static Return......Page 48 Expiration and Strike Price Selection......Page 49 In-the-Money Buy/Writes......Page 51 Stock Selection......Page 52 Rolling Out......Page 53 Rolling Up and Out......Page 55 Rolling Down......Page 56 Buying Protective Puts......Page 57 Strike and Expiration Decisions......Page 58 Long Cash/Long Call Strategy......Page 59 Buy Call/Start Saving Strategy......Page 61 Writing Puts Without and with Leverage......Page 63 Rolling Short Put Positions......Page 65 Other Rolling Strategies......Page 66 Systematic Option Writing......Page 67 Buying Calls......Page 69 Looking Beyond an Option’s Price......Page 70 An Option’s Sweet Spot......Page 77 Relaxing the Volatility Assumption......Page 78 An Option’s Profitability Boundary......Page 79 Choosing the Option’s Expiration Date......Page 80 When to Sell Long Calls......Page 81 Shorting Stocks......Page 82 Buying Puts: An Example......Page 83 Puts’ Profitability Boundary......Page 86 Choosing an Expiration Date......Page 87 Buying Out-of-the-Money Puts......Page 88 CHAPTER 4 OPTIONS 401: OPTION PRICING, VOLATILITY,AND A FIRST GREEK LETTER......Page 91 Stock Price......Page 92 Exercise Price......Page 93 Interest Rates and Dividends......Page 94 Time to Expiration......Page 96 Volatility......Page 100 Historical Volatility......Page 103 Implied Volatility......Page 105 Overvalued and Undervalued Options......Page 106 Real-World Volatilities......Page 107 The Greeks: Delta......Page 108 Delta and Complex Positions......Page 112 Impact of Volatility......Page 113 Early Assignment on Call Options......Page 114 Early Assignment on Put Options......Page 115 Covered Straddles and Combinations......Page 117 Covered Straddles......Page 118 Covered Combinations......Page 120 Testing for Suitability......Page 121 Setting Buying and Selling Targets......Page 122 Building a Stock Position......Page 123 Follow-up Action......Page 124 The Repair Strategy......Page 125 Where Options Come In......Page 126 Entering and Exiting the Position......Page 128 Exit Fear, Enter Greed......Page 129 Repairing High-Volatility Stocks......Page 130 Traditional Leverage: Borrowing......Page 132 Alternative Leverage: Remove Borrowing, Add Options......Page 133 Expanding the Strategy’s Range......Page 136 Final Variation......Page 138 More Later......Page 139 Bull Call Spreads......Page 141 Maximum Theoretical Value......Page 146 Spread Selection......Page 147 Entering Orders......Page 148 Bear Put Spreads......Page 149 Credit Spreads......Page 151 Bull Put Spreads......Page 152 Bear Call Spreads......Page 154 Buying Volatility......Page 155 Buying Straddles for Specific Events......Page 158 Strangles......Page 160 Buying Volatility: Call Back Spreads......Page 162 Comparison to Other Strategies......Page 164 Buying Volatility: Put Back Spreads......Page 165 Alternative Spreads......Page 167 In-the-Money Short Put......Page 168 Selling Volatility: Straddles and Front Spreads......Page 169 Put Front Spread......Page 172 Synthetics......Page 173 Choosing Strike Prices......Page 175 Short Synthetics......Page 176 Buying Calls to Hedge a Short Stock......Page 177 The Married Call......Page 178 Options on Exchange-Traded Funds......Page 181 Writing Puts to Go Long the Market......Page 182 Writing Covered Calls to Ease Out of a Position......Page 184 Index Options: Special Features......Page 185 Settlement Amount......Page 186 European versus American......Page 187 Broad and Narrow......Page 188 Parallel Universes......Page 189 Buying Protective Puts......Page 190 Buying Index Collars......Page 195 The Continental Divide......Page 197 Market Risk......Page 198 Buying Calls and Puts......Page 199 Spreading......Page 203 Butterflies and Other Inhabitants of the Menagerie......Page 206 Calendar Spreads......Page 211 CHAPTER 8 HEDGING CORPORATE STOCK AND OPTIONS......Page 215 Equity Collars......Page 216 Reality Interferes with Theory......Page 218 Other Potential Collar Buyers......Page 220 The Two Half-Collars: Buying Puts, Writing Calls......Page 221 Buying Partial Insurance......Page 222 What and When to Hedge......Page 226 If It Looks Like Stock .........Page 227 CHAPTER 9 OPTIONS 901: ADVANCED THEORETICAL NOTIONS......Page 231 Calculating Historical Volatility......Page 232 What Volatility Tells Us About Direction......Page 233 Do the Markets Have the Monday Morning Blues?......Page 234 Implied Volatility of Different Option Series......Page 236 The Market’s Implied Volatility......Page 237 VIX Levels......Page 238 VIX: Thermometer or Barometer......Page 240 The Greeks: Gamma......Page 241 Long Straddle/Short Straddle......Page 243 The Greeks: Theta......Page 244 The Greeks: Vega......Page 245 The Greeks: Rho......Page 246 The Relationship Among the Greeks......Page 247 Understanding the Black-Scholes Option Pricing Equation......Page 248 Option Pricing and Interest Rates......Page 250 Extra! Options Offered Below Intrinsic Value!......Page 253 Risk Management......Page 255 The “It’ll Never Go There” Attitude......Page 256 Leverage......Page 257 Earning Your Stripes......Page 259 Options and Taxes......Page 260 Covered Writing......Page 261 The Wash Sale Rule......Page 262 Finding Your Style......Page 263 INDEX......Page 265

Equity options, the all-purpose vehicles that today's smartest investors use to increase profits, reduce risks, or both

Equity options, considered overly complex and aggressive by most investors, are actually among today's most straightforward and easy-to-use investment vehicles. Providing both protection against loss and potential for exceptional profits, they are ideal for virtually any trader or investor.

The Options Strategist outlines effective and easy-to-follow strategies for incorporating the power of equity options into your trading program. Starting with the basics of options and options trading, it goes on to reveal specific strategies that you can use to:

• Maximize your trading profits in up, down, or sideways markets
• Protect your portfolio against sudden market declines
• Take advantage of price swings, regardless of their direction
• Hedge your corporate stock and/or options against unforeseen events
• Employ advanced options techniques to take your trading success to the next level

It's time that you discovered the many benefits of equity options. Let The Options Strategist show you just how easy and profitable options investing can be and provide you with the knowledge and tools you need to give your portfolio the options advantage.

Investors of all types, with portfolios of every size, are beginning to realize the protection and profit in equity options. Long seen as a volatile investment designed strictly for gamblers and high rollers, options in fact offer unique advantages to even the most conservative investor and are suitable for rounding out virtually any investment portfolio.

The Options Strategist tells you everything you need to know to trade and invest with equity options. Whether you use options to aggressively increase trading profits through the power of leverage or conservatively protect the stocks in your portfolio against sudden market reversals, this hands-on, practical guide will introduce you to strategies from basic to advanced, including:

• Buying calls and puts
• Writing covered calls and puts
• Writing naked calls and puts
• Straddles
• Spreads
• Strangles
• Collars
• Combinations

But more than just discussing what to do and how to do it, The Options Strategist explains why to do it. Why would an investor buy an option to purchase 100 shares of a stock instead of just buying the stock itself? Why would an investor write calls on shares of stock he or she already owns? Or write both puts and calls on that same stock? This plain-talking guidebook explains the strategic motivation behind each of these examples and dozens more, along with the rewards, risks, best outcomes, and worst outcomes for each.

In addition, The Options Strategist takes an in-depth look at the theory behind options investing. Option pricing, implied and historical volatility, the Greeks, the Black-Scholes Option Pricing Model: For each of these topics, key questions are asked and answered, central arguments are introduced and analyzed, and specific technical terms are demystified to underscore their practical applications (or lack thereof) for options traders and investors.

The result is a guidebook that lays a solid foundation for equity option trading and investing. The Options Strategist explains how to use basic techniques for both profit and protection and then explores more advanced aspects for the truly serious student of options trading. It is, in short, today's most comprehensive introduction and rulebook for making equity option trading an integral part of your everyday investing strategy.

Equity options, the all-purpose vehicles that today's smartest investors use to increase profits, reduce risks, or both Equity options, considered overly complex and aggressive by most investors, are actually among today's most straightforward and easy-to-use investment vehicles. Providing both protection against loss and potential for exceptional profits, they are ideal for virtually any trader or investor. The Options Strategist outlines effective and easy-to-follow strategies for incorporating the power of equity options into your trading program. Starting with the basics of options and options trading, it goes on to reveal specific strategies that you can use to: Maximize your trading profits in up, down, or sideways markets Protect your portfolio against sudden market declines Take advantage of price swings, regardless of their direction Hedge your corporate stock and/or options against unforeseen events Employ advanced options techniques to take your trading success to the next level It's time that you discovered the many benefits of equity options. Let The Options Strategist show you just how easy and profitable options investing can be and provide you with the knowledge and tools you need to give your portfolio the options advantage. Investors of all types, with portfolios of every size, are beginning to realize the protection and profit in equity options. Long seen as a volatile investment designed strictly for gamblers and high rollers, options in fact offer unique advantages to even the most conservative investor and are suitable for rounding out virtually any investment portfolio. The Options Strategist tells you everything you need to know to trade and invest with equity options. Whether you use options to aggressively increase trading profits through the power of leverage or conservatively protect the stocks in your portfolio against sudden market reversals, this hands-on, practical guide will introduce you to strategies from basic to advanced, including: Buying calls and puts Writing covered calls and puts Writing naked calls and puts Straddles Spreads Strangles Collars Combinations But more than just discussing what to do and how to do it, The Options Strategist explains why to do it. Why would an investor buy an option to purchase 100 shares of a stock instead of just buying the stock itself? Why would an investor write calls on shares of stock he or she already owns? Or write both puts and calls on that same stock? This plain-talking guidebook explains the strategic motivation behind each of these examples and dozens more, along with the rewards, risks, best outcomes, and worst outcomes for each. In addition, The Options Strategist takes an in-depth look at the theory behind options investing. Option pricing, implied and historical volatility, the Greeks, the Black-Scholes Option Pricing Model: For each of these topics, key questions are asked and answered, central arguments are introduced and analyzed, and specific technical terms are demystified to underscore their practical applications (or lack thereof) for options traders and investors. The result is a guidebook that lays a solid foundation for equity option trading and investing. The Options Strategist explains how to use basic techniques for both profit and protection and then explores more advanced aspects for the truly serious student of options trading. It is, in short, today's most comprehensive introduction and rulebook for making equity option trading an integral part... Equity options, the all-purpose vehicles that today's smartest investors use to increase profits, reduce risks, or both Equity options, considered overly complex and aggressive by most investors, are actually among today's most straightforward and easy-to-use investment vehicles. Providing both protection against loss and potential for exceptional profits, they are ideal for virtually any trader or investor. The Options Strategist outlines effective and easy-to-follow strategies for incorporating the power of equity options into your trading program. Starting with the basics of options and options trading, it goes on to reveal specific strategies that you can use to: Maximize your trading profits in up, down, or sideways markets Protect your portfolio against sudden market declines Take advantage of price swings, regardless of their direction Hedge your corporate stock and/or options against unforeseen events Employ advanced options techniques to take your trading success to the next level It's time that you discovered the many benefits of equity options. Let The Options Strategist show you just how easy and profitable options investing can be and provide you with the knowledge and tools you need to give your portfolio the options advantage. Investors of all types, with portfolios of every size, are beginning to realize the protection and profit in equity options. Long seen as a volatile investment designed strictly for gamblers and high rollers, options in fact offer unique advantages to even the most conservative investor and are suitable for rounding out virtually any investment portfolio. The Options Strategist tells you everything you need to know to trade and invest with equity options. Whether you use options to aggressively increase trading profits through the power of leverage or conservatively protect the stocks in your portfolio against sudden market reversals, this hands-on, practical guide will introduce you to strategies from basic to advanced, including: Buying calls and puts Writing covered calls and puts Writing naked calls and puts Straddles Spreads Strangles Collars Combinations But more than just discussing what to do and how to do it, The Options Strategist explains why to do it. Why would an investor buy an option to purchase 100 shares of a stock instead of just buying the stock itself? Why would an investor write calls on shares of stock he or she already owns? Or write both puts and calls on that same stock? This plain-talking guidebook explains the strategic motivation behind each of these examples and dozens more, along with the rewards, risks, best outcomes, and worst outcomes for each. In addition, The Options Strategist takes an in-depth look at the theory behind options investing. Option pricing, implied and historical volatility, the Greeks, the Black-Scholes Option Pricing Model: For each of these topics, key questions are asked and answered, central arguments are introduced and analyzed, and specific technical terms are demystified to underscore their practical applications (or lack thereof) for options traders and investors. The result is a guidebook that lays a solid foundation for equity option trading and investing. The Options Strategist explains how to use basic techniques for both profit and protection and then explores more advanced aspects for the truly serious student of options trading. It is, in short, today's most comprehensive introduction and rulebook for making equity option trading an integral part of your everyday investing strategy. Provides effective strategies for using options for either hedging or trading, walks readers through basic hedging strategies and then moves on to the advanced trading techniques including spreading, straddling, and more.