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Options Plain & Simple: Successful Strategies Without Rocket Science

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Options Plain & Simple: Successful Strategies Without Rocket Science

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Description

  • Copyright 1999
  • Dimensions: 6 3/4 x 9 1/2
  • Pages: 288
  • Edition: 1st
  • Book
  • ISBN-10: 0-273-63878-5
  • ISBN-13: 978-0-273-63878-0

Options, Plain & Simple is a straightforward and practical guide to the fundamentals of options. It is plain because it includes only what is essential to basic understanding. It is simple because it presents options in conventional terms, with a minimum of jargon. It is thorough; it is not simplistic.  This book will benefit all newcomers to options, introducing them to the instruments and markets, and giving them the competence and confidence to trade successfully. It opens up new opportunities for private investors who previously felt intimidated by the mystique and jargon surrounding options, and saves brokers much of the time they spend explaining options fundamentals to their clients.  This is not rocket science. Options are explained in terms of real-life, every-day circumstances and accessible language. Clarity and practical application are paramount; unnecessary theory and jargon conspicuous by their absence.  Veteran US trader Lenny Jordan takes the secrets of options to the every-day investor. Options, Plain & Simple will enable all investors to use options wisely, by fully understanding the instruments, their risks and successful applications.  Options, Plain & Simple introduces readers to the three key options markets ¿ stocks, bonds and commodities, the various types of options contracts - from straight options to strangles and butterflies - and covers the fundamentals of options pricing and trading. It outlines effective options strategies for beginners and intermediate investors, and offers unique insights into the behaviour of options under a wide variety of market conditions.  Illustrative stories, trading scenarios and worked examples will lead investors through the concepts with one eye always on the realities of the market.  "A key step in learning to use options is to spend plenty of time dwelling on a couple of dozen "building block" concepts that are both mathematical and strategic.  This book offers the neophyte the opportunity to take his mind out for some exercise over almost all of tech option topics that should matter to him, and to check his progress through relevant questions and answers."                                 Martin P. O'Connell, O'Connell & Piper Associates, Chicago.  The Author  Lenny Jordan currently trades options at the London International Financial Futures and Options Exchange. Formerly he traded at the Chicago Board of Trade. He gives options training seminars, and is a risk consultant.

Sample Content

Table of Contents



Preface.


About the Author.


About this Book.


Introduction.

I. OPTIONS FUNDAMENTALS.

 1. Options in Everyday Life.
 2. The Basics of Calls.
 3. The Basics of Puts.
 4. Pricing and Behaviour.
 5. Volatility and Pricing Models.
 6. The Greeks and Risk Assessment: Delta.
 7. Gamma and Theta.
 8. Vega.

II. OPTIONS SPREADS.

Introduction.

 9. Call Spreads and Put Spreads, or One by One Directional Spreads.


10. One by Two Directional Spreads.


11. Combos and Hybrid Spreads for Market Direction.


12. Volatility Spreads.


13. Iron Butterflies and Iron Condors: Combining Straddles and Strangles for Reduced Risk.


14. Butterflies and Condors: Combining Call Spreads and Put Spreads.


15. The Covered Write, the Calendar Spread and the Diagonal Spread.

III. THINKING ABOUT OPTIONS.

16. The Interaction of the Greeks.
17. Options Performance Based on Cost.
18. Options Talk 1.
19. Options Talk 2: Trouble Shooting and Common Problems.
20. Volatility Skews.

IV. BASIC NON-ESSENTIALS.

21. Futures, Synthetics and Put-Call Parity.
22. Conversions, Reversals, Boxes and Options Arbitrage.
23. Conclusion.
Glossary.
Suggestions for Further Reading.
Index of Underlying Contracts.
Index.

Preface

What an option is

The difference between a commodity, a futures contract, and an options contract is illustrated in the following three paragraphs, which will take you 1 1/2 minutes to read.

Suppose you're in the market for an oriental rug. You find the rug of your choice at a local shop, you pay the shopkeeper $500, and he transfers the rug to you. You have just traded a commodity.

Suppose instead you wish to own the rug, but you prefer to purchase it in one week's time. You may be on your way to the airport, or maybe you need the short-term use of your money. You and the shopkeeper agree, verbally or in writing, to exchange the same rug for $500 one week from now. You have just traded a futures contract.

Alternatively, you may like the rug on offer, but you may want to shop around before making a final decision. You ask the shopkeeper if he will hold the rug in reserve for you for one week. He replies that your proposal will deny him the opportunity of selling the rug, and as compensation, he asks that you pay him $10. You and the shopkeeper agree, verbally or in writing, that for a fee of $10 he will hold the rug for you for one week, and that at any time during the week you may purchase the same rug for a cost of $500, excluding the $10 cost of your agreement. You, on the other hand, are under no obligation to buy the rug. You have just traded an options contract.

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