Show Me Your Options!

Contents

Introduction

Chapter 1 Options are not assets, they are bets.

Chapter 2 Every option contract has a buyer and a seller; one is long, one is short, but which one has the best odds of winning?

Chapter 3 Strong trends are the friend of an option buyer and the enemy of an option seller.

Chapter 4 Time is an option seller’s friend, but the option buyer’s enemy. (theta)

Chapter 5 volatility is the option buyer’s friend but the option seller’s enemy. (vega)

Chapter 6 How much of the move do you get for the money? (delta)

Chapter 7 Stocks for rent: covered calls

Chapter 8 Selling lottery tickets: naked options

Chapter 9 Buying lottery tickets: deep out-of-the-money options

Chapter 10 Trends determine who wins: strangles and straddles

Chapter 11 The twins: every position has a synthetic relative

Chapter 12 Spreads: ratio, calendar, diagonal

Chapter 13 The wind beneath the pro’s wings: butterflies and condors

Chapter 14 Dealing with the behavioral problems of immature options

Chapter 15 A trader’s choices: insurance, stop losses, or ruin

Chapter 16 Your method, your rules, your edge

Appendix A: Relative time value of options based on the time to expiration of the contract

Appendix B: Odds and expected payout of selected option strategies

Appendix C: The relationship between option premiums, deltas, standard deviations, and profit probabilities

Appendix D: Time progression payout potential

Appendix E: Expanded table of synthetic positions