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Index
Acknowledgments
About the Author
Preface
Section I: Basic Concepts
1 INTRODUCTION
Why Options?
The Basic Concept of Options
Major Differences Between Stocks and Options
Leverage
Time Limitation
Price Movement
Financial Risk
A Detailed Explanation of Options
The Option Contract
The Call Option
The Put Option
Comments
2 OPTION SELECTION
What Is a Cheap Option?
Selecting a Call
Overall Evaluation
Selecting a Put
3 ENTERING AND EXITING OPTION TRADES
Entering a Trade
Exiting a Trade
4 THE GREEKS
Delta
Computing the Delta of a Call Option
Application of the Delta
Computing the Delta of a Put Option
Theta
Gamma
Vega
Rho
5 RISK GRAPHS
Single Option Trade
Multiple Option Trade
Comments
6 LEAPS
Comments
7 ASSIGNMENT ANXIETY
Comments
Applications
8 BROKER SELECTION
Types of Brokers
Commissions
Trading Platform
Margin and Trading Limitations
Live Broker Assistance
Comments
9 MISCELLANEOUS TIPS
Time Is Money
Trading with the Trend
Risk Capital for Options Trading
Tracking Trades
Anticipating Events
Real-Time Quotes
Market Orders with Options
Options Calculator
Section II: Trading Strategies
10 VERTICAL SPREADS
Debit Vertical Spreads
Bull Call Spread
Bear Put Spread
Comments
Credit Vertical Spreads
Bull Put Spread
Bear Call Spread
Comments
11 *
*
EVENT-PRODUCING CREDIT SPREADS
Comments
12 CALENDAR SPREADS
The Rollout Maneuver
Comments
13 *
*
ADVANCED CALENDAR SPREADS
Volatility Skew Trades
Comments
Ratio Calendar Spread Trades
Comments
Deep-in-the-Money LEAPS Put Calendar Spreads
Diagonal Calendar Spread Trades
14 COVERED CALLS
An Idealized Trade
A Realistic Trade
Covered Call vs. Naked Put
Comments
15 STRADDLES AND STRANGLES
The Straddle Trade
Comments
The Strangle Trade
16 STOCK REPAIR AND STOCK ENHANCEMENT
Stock Repair Strategy
Comment
Stock Enhancement Strategy
17 MARRIED PUTS
Comments
18 COLLARS
Comments
19 *
*
ADVANCED COLLARS
Comments
20 NAKED OPTION WRITING
The Risk of Naked Option Writing
Acquiring Stock with Naked Puts
21 STOCK SUBSTITUTES
Synthetic Long Stock
Comments
Deep-in-the-Money Put
Deep-in-the-Money Call
22 BACKSPREADS
Comments
23 BUTTERFLY SPREADS
Standard Butterfly Trade
Comments
Butterfly Trade with Adjustments
Comment
Unbalanced Butterfly Trade
24 IRON CONDORS AND DOUBLE DIAGONALS
The Iron Condor Trade
The Double Diagonal Trade
Comments
25 AN END-OF-YEAR TAX STRATEGY
Tax Code Restrictions
Qualified Covered Calls
Basic Strategy
Follow-Up Variations
Comments
Section III Special Topics
26 *
*
DAY TRADING AN INDEX WITH OPTIONS
Comments
27 *
*
DELTA-NEUTRAL TRADING
28 *
*
THEORY OF MAXIMUM PAIN
29 *
*
IMPLIED VOLATILITY AND THE BLACK-SCHOLES FORMULA
Historical Background
Derivation of the Black-Scholes Formula
Application of the Black-Scholes Formula
Implied Volatility
Applications of Implied Volatility
Comments
30 *
*
THE PUT-CALL PARITY RELATIONSHIP
Calls Cost More Than Puts
Applications of Put-Call Parity
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