Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks

Contents Acknowledgments xii About the Author xiii Preface xiv Section I Basic Concepts 1 Chapter 1 Introduction 3 Why Options? 3 The Basic Concept of Options 4 Major Differences Between Stocks and Options 4 A Detailed Explanation of Options 7 Comments 15 Chapter 2 Option Selection 17 What Is a Cheap Option? 17 Selecting a Call 20 Overall Evaluation 24 Selecting a Put 24 Chapter 3 Entering and Exiting Option Trades 25 Entering a Trade 27 Exiting a Trade 28 Chapter 4 The Greeks 31 Delta 31 Theta 35 Gamma 36 Vega 37 Rho 38 Chapter 5 Risk Graphs 39 Single Option Trade 40 Multiple Option Trade 42 Comments 44 Chapter 6 LEAPS and Weekly Options 45 LEAPS 46 Weekly Options 50 Chapter 7 Assignment Anxiety 53 Comments 55 Applications 56 Chapter 8 Broker Selection 59 Types of Brokers 59 Commissions 60 Trading Platform 61 Margin and Trading Limitations 62 Level 3 Trading 63 Live Broker Assistance 63 Comments 64 Chapter 9 Miscellaneous Tips 65 Time Is Money 65 Trading with the Trend 66 Risk Capital for Options Trading 66 Tracking Trades 67 Anticipating Events 68 Real-Time Quotes 68 Market Orders with Options 69 Options Calculator 69 Section II Trading Strategies 71 Chapter 10 Vertical Spreads 73 Debit Vertical Spreads 74 Credit Vertical Spreads 77 Comments 80 Vertical Spreads with Weekly Options 80 Chapter 11* Event-Producing Credit Spreads 81 Comments 87 Chapter 12 Calendar Spreads 89 The Rollout Maneuver 93 Comments 94 Calendar Spreads with Weekly Options 95 Chapter 13* Advanced Calendar Spreads 97 Volatility Skew Trades 97 Ratio Calendar Spread Trades 101 Deep-in-the-Money LEAPS Put Calendar Spreads 103 Diagonal Calendar Spread Trades 106 Chapter 14 Covered Calls 111 An Idealized Trade 112 A Realistic Trade 112 Covered Call Versus Naked Put 114 Comments 117 Covered Calls with Weekly Options 118 Chapter 15 Straddles and Strangles 121 The Straddle Trade 121 The Strangle Trade 127 Straddles and Strangles with Weekly Options 128 Chapter 16 Stock Repair and Stock Enhancement 131

W. Edward Olmstead has a B.S. from Rice University and a Ph.D from Northwestern University, where he is currently Professor of Applied Mathematics in the McCormick School of Engineering and Applied Sciences. He has received several prestigious awards for teaching excellence including an endowed chair. His teaching activities include courses that cover both the theory of options pricing and practical strategies for trading options. In the world of finance, Dr. Olmstead has more than fifteen years of experience in the trading of options. He holds a FINRA Series 65 license along with considerable experience as an options consultant. He has written various articles on options for the online media. Dr. Olmstead was Editor of The Options Professor newsletter published by Independent Investor, Inc. during 2003-07. His consulting activities included service as an options analyst for Spear Capital Management. He also worked on an ultra short-term trading concept for a member firm of the Chicago Mercantile Exchange. Since 2010, he has utilized a proprietary options strategy in the management of funds for a group of private clients. For more information about Dr. Olmstead's current options interests, go to www.olmsteadoptions.com.