Equity and Index Options Explained

Foreword

As the title suggests, this book aims to explain the subject of equity and index options. The challenges involved in explaining this subject lie not in the complexity of the subject matter but in the sheer volume of it. A bit like a foreign language, very few of the individual pieces of the jigsaw are difficult to understand but that doesn't mean that putting it all together is easy. Many people know bits and pieces of information about options; they know, perhaps, that options “erode” or that selling options can be dangerous. They have picked up these nuggets of knowledge without understanding the bigger picture, without understanding the context – and that can be costly.

The aim of the book is to move the reader steadily towards a full understanding of this wide-reaching subject. From absolute basics to advanced trading techniques, the book aims to explain both the theory and practice of equity options in clear, accessible terms. This is not a mathematical textbook; equations and formulae are avoided wherever possible. Rather this is an options text aimed at every man and every woman, whether professional investor or part-time “punter”.

As a professional options trader since 1984, I have learnt about options from a practical perspective. Accordingly, the book includes plenty of real-world examples, along with practical trading tools (including a pricing model) and resources. As a professional options consultant and teacher since 2000, I have learnt to anticipate key ...