Getting Started in Advanced Options (Paperback, Illustrated)

Acknowledgments vii Element Key ix Introduction xi Chapter 1: Strategies in Volatile Markets: Uncertainty as an Advantage 1 Avoiding 10 Common Mistakes 3 Modifying Your Risk Tolerance 10 The Nature of Market Volatility 13 Market Volatility Risk 14 Options in the Volatile Environment 19 Chapter 2: Combinations and Spreads: Creative Risk Management 31 Overview of Advanced Strategies 34 Vertical Spread Strategies 41 Horizontal and Diagonal Spread Strategies 52 Altering Spread Patterns 57 Chapter 3: Hedges and Straddles: More Creativity 73 The Two Types of Hedges 73 Hedging Option Positions 77 Straddle Strategies 83 Theory and Practice of Combined Techniques 89 Chapter 4: Options for Specialized Trading: Leveraging the Technical Approach 95 Swing-Trading Basics 97 The Setup Signal 100 Testing the Theory 103 A Strategic View of Options for Swing Trading 107 Options Used for Other Trading Strategies 110 Swing- and Day-Trading Advanced Strategies 111 Chapter 5: Options on Futures: Leveraging Your Leverage 117 Important Distinctions 118 Regulatory Differences 124 Chapter 6: Trading Index Options: Playing the Broader Market 131 Advantages to Trading Index Options 133 Exercise and Expiration Rules 135 Index Option Strategies 137 Structured Index Options 140 Chapter 7: Synthetic Positions: Tracking the Stock 147 Synthetic Put (Protected Short Sale) 149 Synthetic Long Call (Insurance Put or Married Put) 151 Synthetic Long Stock 152 Synthetic Short Stock 155 Split Strike Strategy (Bullish) 157 Split Strike Strategy (Bearish) 159 Collars 162 Synthetic Straddles 169 Chapter 8: Risk: Rules of the Game 177 Identifying the Range of Risk 178 Evaluating Your Risk Tolerance 188 Chapter 9: Taxes: The Wild Card of Options Trading 195 Qualified Covered Calls-Special Rules 200 Looking to the Future 206 Chapter 10: Choosing Stocks: Finding the Right Ingredients 213 Developing an Action Plan 217 Selecting Stocks for Call Writing 220 Averaging Your Cost 225 Analyzing Stocks 230 Applying Analysis to Calls-the "Greeks" 250 Acting on Good Information 258 Glossary 267 Recommended Reading 285 About the Author 287 Index 289