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Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks, 2nd Edition
- By W. Edward Olmstead
- Published Dec 19, 2012 by FT Press.
- Copyright 2013
- Dimensions: 6" x 9"
- Pages: 272
- Edition: 2nd
- Book
- ISBN-10: 0-13-265568-3
- ISBN-13: 978-0-13-265568-2
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Product Author Bios
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 propriatary 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.
Master option trading strategies one step at a time! Options for the Beginner and Beyond, Second Edition teaches options through brief, carefully-paced lessons on option concepts and trading strategies, crystal-clear definitions, and plenty of real trading examples. Every lesson builds on the one preceding it, explaining options in plain English, and guiding you all the way to advanced strategies covered in no other introductory tutorial. Drawing on his extensive experience teaching options trading to beginners -- and five years editing a leading options newsletter -- W. Edward Olmstead shows how to systematically control your risk, protect your investments, and maximize your profits. This new Second Edition integrates new coverage of weekly options throughout, and presents updated tax strategies every options trader needs to know. Olmstead shows you how to do all this, and much more:
- Select options with high profit potential
- Enter and exit trades
- Choose brokers
- Work with the Greeks, risk graphs, and LEAPs
- Use vertical, event producing, and calendar spreads
- Trade covered calls, straddles, strangles, married puts, and collars
- Master these and other sophisticated strategies: naked options, stock substitutes, backspreads, butteryfly spreads, iron condors, and double diagonals
- Implement effective end-of-year tax strategies
- Day trade indexes with options
- Use delta-neutral trading
- Leverage the theory of maximum pain; implied volatility, and Black-Scholes
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5 of 5 people found the following review helpful
Not Nearly As Intimidating As Most Books On The Subject, By
This review is from: Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks (2nd Edition) (Hardcover)
Customer review from the Amazon Vine™ Program (What's this?)
First off, this book is very light on the Greek. In fact, equations don't appear until the end of the book. It's also very well-paced, quite read-able, and states upfront which parts are for beginners and which parts are for the more experienced.The first section, consisting of nine chapters, provides the novice with just enough information to get in over her head. The second section, consisting of sixteen chapters, provides the reader with terse basics on some of the more popular options strategies. The third section, titled Special Topics, provides the more advanced readers with fairly complex strategies involving a bit of math; it is here where the equations (and rocket science) finally appear. The book has two notable weaknesses. For one, it should have invoked the forces analogy. Generally speaking, over the life of an option, there are two main forces, the time force and the price force. The time force works to reduce the value of the option,... Read more
6 of 7 people found the following review helpful
Excellent book for beginners,
Amazon Verified Purchase(What's this?)
This review is from: Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks (2nd Edition) (Hardcover)
Options are complex but this book goes through every component step-by-step and explains Optins in a language I could understand. Various strategies are covered with the pitfalls and benefits described. All in all a great book for anyone new to Options.
3 of 3 people found the following review helpful
For Experienced Traders Getting into Options, By
This review is from: Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks (2nd Edition) (Hardcover)
Customer review from the Amazon Vine™ Program (What's this?)
While the title says "For Beginners and Beyond," this is mostly for those who are beyond beginners. While there is a lot about how to trade options, there is very little about how to think about or understand the underliers (the things you are buying and selling options on). Therefore, this is only for people who have actively traded. If you are a buy and hold investor, you may not think that much about entry and exit points (when to buy and when to sell), thinking mainly to add to positions you like over time.To Olmstead's credit, the book presents a number of scenarios where you can use options to your advantage, both trading them on their own and in positions where you have a position in the underlier as well. However, in places he feels like a cheerleader for options trading, . There's not a lot about when using an option is a bad idea, or even an unnecessary one. Rather, the focus is on which option, and at times you wonder why anyone would ever bother to buy a stock... Read more |
Table of Contents
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
Stock Repair Strategy 132
Stock Enhancement Strategy 135
Chapter 17 Married Puts 139
Comments 143
Married Puts with Weekly Options 143
Chapter 18 Collars 145
Comments 152
Chapter 19* Advanced Collars 155
Comments 162
Chapter 20 Naked Option Writing 163
The Risk of Naked Option Writing 164
Acquiring Stock with Naked Puts 168
Comment 169
Chapter 21 Stock Substitutes 171
Matching the Stock Delta 171
Synthetic Long Stock 171
Deep-in-the-Money Put 174
Deep-in-the-Money Call 176
Chapter 22 Backspreads 179
Comments 185
Backspreads with Weekly Options 185
Chapter 23 Butterfly Spreads 189
Standard Butterfly Trade 189
Butterfly Trade with Adjustments 192
Unbalanced Strikes Butterfly Trade 195
Unbalanced Contracts Butterfly Trade 197
Chapter 24 Iron Condors and Double Diagonals 201
The Iron Condor Trade 201
The Double Diagonal Trade 204
Comments 206
Iron Condors and Double Diagonals with Weekly Options 207
Chapter 25 An End-of-Year Tax Strategy 209
Tax Code Restrictions 209
Qualified Covered Calls 210
Basic Strategy 211
Follow-Up Variations 214
Comments 215
Section III Special Topics 217
Chapter 26* Day Trading an Index with Options 219
Comments 222
Chapter 27* Delta-Neutral Trading 223
Review of the Delta Concept 223
A Delta-Neutral Portfolio 225
Delta-Neutral Trading for a Profit 227
Chapter 28* Theory of Maximum Pain 229
Chapter 29* Implied Volatility and the Black-Scholes Formula 233
Historical Background 233
Implied Volatility 236
Applications of Implied Volatility 237
Comments 237
Chapter 30* The Put-Call Parity Relationship 239
Calls Cost More Than Puts 239
Applications of Put-Call Parity 242
Index 243
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