Synopses & Reviews
Brief, carefully paced lessons on options and trading strategies using verbal definitions and many trading examples for clarification. Each lesson builds on the one preceding it and explains options in plain English, from start to finish. Step-by-step coverage of controlling risk, protecting your investments -- even advanced strategies other introductory books ignore! Authored by Dr. W. Edward Olmstead, contributing editor to The Spear Report and editor of The Options Professor newsletter.
Review
Trader, professor and editor of a successful options newsletter Olmstead consolidates his vast knowledge and experience into this accessible guide to options.
Appropriate for both beginners and more seasoned investors, this book covers everything from the basics of call and put options to advanced topics like delta-neutral trading and the Black-Scholes formula. Because buying options is cheaper and less risky than buying stocks, these time-limited investments are a great way to increase profits. Olmstead is a natural teacher, employing a concise, no-nonsense and easy-to-understand style. Readers will learn why “time is money,” how to use vertical spreads, how options can cut your tax bill and how to make profits even when you can't predict the market direction. Most importantly, Olmstead teaches how to “think like an option trader,” providing the market acumen necessary to maximize profit.
Sure to be appreciated by options traders of all levels.
--Kirkus Reviews, Vol. 3, Issue 3 (March 31, 2006)
Synopsis
"Since the launch of "The Options Professor" newsletter, subscribers have raved about the skills of Dr. Olmstead. He has the rare ability to make options trading understandable and practical for beginners, and to satisfy the requirements of seasoned professionals for sophisticated, risk averse techniques. "The Options Professor" has delivered quality education, solid research, and above all, performance!" -Gregory R. Spear, publisher, "The Spear Report" and Spear's Security Industry Analyst President, Spear Capital Management, Inc. "Hands down, the best book currently available on option trading for beginners. Olmstead details practical option strategies clearly and concisely-the book is a must for any serious options trader." -Mitch Zacks, author, "Ahead of the Market" "Clearly written by someone who does as well as teaches, "Options for the Beginner and Beyond" is aptly named. This book is easy to read and is also full of gems that will appeal to all levels of trader. Remarkably succinct, Ed Olmstead takes you on a fast-paced journey, avoiding any fluff and getting straight to the point. Great for dipping into, and great for reading all the way through." -Guy Cohen, author, "Options Made Easy" and "The Bible of Options Strategies"; creator of OptionEasy (www.optioneay.com) As the editor of "The Options Professor" newsletter, W. Edward Olmstead has earned a worldwide reputation for demystifying options-and for presenting trading strategies that work. Now, drawing on his extensive trading and teaching experience, Dr. Olmstead presents the most practical, easy-to-understand guide to options ever written. Full of carefully paced brief lessons, real-world examples, and step-by-stepexplanations, this book demonstrates exactly how you can participate in the movement of a high-priced stock for a fraction of its usual cost. You won't just learn how to achieve breakthrough profits: you'll learn how to use options to systematically control your portfolio risk. Every serious investor should know how to leverage the power of options. This book makes it easier than ever before.
- Think like an options trader
"Master the thought process behind choosing profitable puts and calls"
- Master every core strategy-and know when to use them
"From vertical to horizontal spreads, butterflies to condors"
- Squeeze the risk out of stock ownership
"Use options to collar a stock and make money without risk"
- Use options to cut your tax bill
"Discover an end-of-year strategy for delaying capital gains"
- Understand advanced professional-level concepts
"The maximum pain effect, Black-Scholes pricing model, put-call parity, and more"
Synopsis
Brief, carefully paced lessons on options and trading strategies using verbal definitions and many trading examples for clarification. Each lesson builds on the one preceding it and explains options in plain English, from start to finish. Step-by-step coverage of controlling risk, protecting your investments -- even advanced strategies other introductory books ignore! Authored by Dr. W. Edward Olmstead, contributing editor to The Spear Report and editor of The Options Professor newsletter.
About the Author
Dr. W. Edward Olmstead is the editor of The Options Professor, one of the world’s leading newsletters on options trading. He is also an options analyst for Spear Capital Management. He has consulted on short-term trading strategies with a member company of the Chicago Mercantile Exchange.
Dr. Olmstead is Professor of Applied Mathematics in the McCormick School of Engineering and Applied Sciences at Northwestern University. He has taught courses that cover both the theory for options pricing and practical strategies for trading options. Dr. Olmstead has received several awards including an endowed chair for teaching excellence and has been praised by his colleagues as “the quintessential teacher in our midst.”
Table of Contents
CONTENTS Acknowledgments
About the Author
Preface
Section I: BasicConcepts
- 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
- 6: LEAPS
- 7: Assignment Anxiety
- 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: TradingStrategies
- 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
- 12: Calendar Spreads
- The Rollout Maneuver
- Comments
- 13*: Advanced Calendar Spreads
- Volatility Skew Trades
- Ratio Calendar Spread Trades
- 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
- The Strangle Trade
- 16: Stock Repair and Stock Enhancement
- Stock Repair Strategy
- Comment
- Stock Enhancement Strategy
- 17: Married Puts
- 18: Collars
- 19*: Advanced Collars
- 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
- 23: Butterfly Spreads
- Standard Butterfly Trade
- Butterfly Trade with Adjustments
- 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 SpecialTopics
- 26*: Day Trading an Index with Options
- 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
?*Chapters with more advanced content are marked with an asterisk and can be passed over by beginners during the first reading of this book.
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