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.Puts and Calls
.Equity Options
.Index Options .Strategies
®.LEAPS .Time Decay
VIRGINIA B. MORRIS AND BESS NEWMAN
Compliments of
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AN INVESTOR'S
GUIDE TO
TRADING OPTIONS
THE BASICS
4 What Is an Option? 10 Where Are Options Traded? 6 How Does Options 12 What Are the Bene?ts? Trading Work? 14 What Are the Risks? 8 On Which Securities Are 16 How Do You Get Started? Options Offered? 18 Key Terms and De?nitions
INVESTING STRATEGIES
20 Introduction to 32 Spread Strategies Options Strategies 34 Understanding Spreads 22 Selecting the Right Security 36 Collar Transactions 24 Call Buying 38 Exit Strategies 26 Call Writing 40 Rolling Up, Over, and Out 28 Put Buying 42 Index Options 30 Put Writing 44 Tax Considerations
RESEARCH AND INFORMATION
46 Trading Options 52 Reading Options Charts 48 Options Information Sources 54 Options Chains 50 Applying Options Information 56 Options Symbols and Sources and Analysis 58 Strategy Screener
GLOSSARY AND INDEX
60 Glossary 62 IndexIIINNNVVVEEESSSTTTIIINNNGGG SSSTTTRRRAAATTTEEEGGGIIIEEESSS IINNVVEESSTTIINNGG SSTTRRAATTEEGGIIEESS
Introduction to MAKE A COMMITMENT you might decide that if the option moves Once you've decided on an appropriate 20% in-the-money before expiration, the options strategy, it's important to stay loss you'd face if the option were exercised Options Strategies focused. That might seem obvious, but the and assigned to you is unacceptable. But fast pace of the options market and the if it moves only 10% in-the-money, you'd Planning, commitment, and research will prepare you complicated nature of certain transactions be con?dent that there remains enough make it dif?cult for some inexperienced chance of it moving out-of-the-money to for investing in options. investors to stick to their plan. If it make it worth the potential loss. seems that the market or underlying Before you buy or sell options you need a AN OVERVIEW OF STRATEGIES security isn't moving in the direction A WORD TO THE WISEstrategy, and before you choose an options It's helpful to have an overview of the you predicted, it's possible that you'll By learning some of the most common mis-strategy, you need to understand how you implications of various options strategies. minimize your losses by exiting early. But takes that options investors make, you'll want options to work in your portfolio. A Once you understand the basics, you'll it's also possible that you'll miss out on a have a better chance of avoiding them.particular strategy is successful only if be ready to learn more about how each future bene?cial change in direction.it performs in a way that helps you meet strategy can work for you-and what the That's why many experts recommend Overleveraging. One of the bene?ts your investment goals. If you hope to potential risks are. that you designate an exit strategy or cut- of options is the potential they offer for increase the income you receive from off point ahead of time, and hold ?rm. For leverage. By investing a small amount, you your stocks, for example, you'll choose a example, if you plan to sell a covered call, can earn a signi?cant different strategy from an investor who percentage return. It's wants to lock in a purchase price for a very important, how-stock she'd like to own. ever, to remember that One of the bene?ts of leverage has a potential options is the ?exibility they downside too: A small offer-they can complement decline in value can mean ?portfolios in many different a large percentage loss. Investors who ways. So it's worth taking the POSSIBLE YOUR MARKET POTENTIAL POTENTIAL aren't aware of the risks of leverage are in time to identify a goal that OBJECTIVE FORECAST RISK RETURN danger of overleveraging, and might face suits you and your ?nancial bigger losses than they expected.CALL Pro?t from Neutral to Limited to the Theoretically plan. Once you've chosen a BUYING increase in price bullish premium paid unlimited Lack of understanding. Another goal, you'll have narrowed of the underlying mistake some options traders make is the range of strategies to security, or not fully understanding what they've use. As with any type of lock in a good agreed to. An option is a investment, only some of the purch... [download for more]
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