The Ultimate Guide to the World of Options Trading by Backus, Manny -- Read -- Imperial Library of Trantor

Index

Introduction: What You’ll Learn in this Guide 3 Chapter 1: Beginning with Call Options 4

Some Clarifications 4 A ‘Real’ World Example 5 Options Standardization 6 Three Examples of Call Options 7 ‘In-the-Money’ and Intrinsic Value 8 Time Value 9 ‘Out-of-the-Money’ 9 Options Advantage #1: Leverage 10 To Exercise or Not To Exercise 11 The Big Picture 11 Now for the Downside 12 Upping the Ante 13 Don’t Try This At Home 14 American-Style vs. European Style Options 14 Important Concepts to Remember 15

Chapter 2: Writing Calls, Covered and Naked 17

Mr. Market Maker 17 An Example of Options Writing 17 Covered vs. Naked 19 Naked Calls: High Leverage and High Risk 20 Limited Profit, Unlimited Losses 21 Closing Out Your Position 22 How Volatility Matters 23 Beta as a Measure of Volatility 25 The Advantage of Writing Calls 25 Important Concepts to Remember 27

Chapter 3: The Long and Short of Puts 28

A Review of Short Selling 28 Short Selling vs. Put Buying 29 An Example of Put Buying 29 Intrinsic Value and Time/Speculative Value 31 Another Example 32 Not All Is Lost 33 How to Use Puts as ‘Insurance’ 33 Why a Put Can Be Better Than a Stop-Loss 34 Using Puts on Restricted Stock 35 Married Puts 37 An Introduction to Writing Puts 38 Why Go Short on Puts? 39 An Example of Put Writing 40 Another Put Writing Strategy 41 Important Concepts to Remember 42

Chapter 4: Putting It All Together 44

The Four Types of Options Positions 44 Motives 45 Closing Out Your Positions 46 In Conclusion… 46 Charts from Wikipedia 47

Chapter 5: Using Collars for Insurance 48

Descriptive Quotes 48 An Example of a Collar Trade 49 What Happens Next? 50 The Purpose of Collars 50 Potential Tax Savings 51 Collars as Collateral 52 Important Concepts to Remember 52

Chapter 6: All About Spreads 53

T-Charts 53 Debit Price Spreads 54 Credit Price Spreads 56 Widening and Narrowing 57 Two More Examples 58 Time Spreads 60 Diagonal Spreads 61 Important Concepts to Remember 61

Chapter 7: Straddles and Combinations 62

Straddles 62 Break-Even on a Long Straddle 63 Short Straddles 64 Straddle Calculations 65 Combinations 66 Important Concepts to Remember 66

Chapter 8: Accounts, Brokers, and Commissions 67

Having an Options Account 67 Margin Accounts 67 International Investors 68 Opening an Account 68 Comparing Brokers 71 Why Pay More? 72 Entering an Order 72 Examples with Commissions 75 Important Concepts to Remember 76 Final Word 77