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No-Hype Options Trading: Myths, Realities, and Strategies That Really Work

Book Description

A straightforward guide to successfully trading options

Options provide traders and investors with a wide range of strategies to lock in profits, reduce risk, generate income, or speculate on market direction. However, they are complex instruments and can be difficult to master if misunderstood.

No-Hype Options Trading offers the straight truth on how to trade the options market. In it, author Kerry Given provides realistic strategies to consistently generate income every month, while debunking many myths about options trading that tend to lead retail traders astray. Along the way, he makes a conscious effort to avoid complex strategies that are appropriate only for market makers or professional traders, and instead focuses on low-risk strategies that can be easily implemented and managed by a part-time trader.

  • Shows how you can use option spreads in conjunction with stocks to produce a regular stream of income

  • Each chapter includes exercises to help you master the material presented

  • Examines how you can adjust option positions as market conditions change in order to maintain an optimal risk/reward profile

Written for anyone interested in successfully trading options, this reliable resource cuts through the hype and misinformation that surrounds options trading and presents a realistic path to profits.

Table of Contents

  1. Cover
  2. Half Title Page
  3. Series
  4. Title Page
  5. Copyright
  6. Dedication
  7. Acknowledgments
  8. Introduction
  9. PART 1: The Foundations of Options Trading
    1. CHAPTER 1: Option Basics
      1. DEFINITIONS OF CALLS AND PUTS
      2. ARE YOU LONG OR SHORT?
      3. OPTION CONTRACT SIZE
      4. IS MY OPTION IN- OR OUT-OF-THE-MONEY?
      5. OPTION TRADE ORDERS
      6. OPTION EXPIRATION
      7. LEAPS OPTIONS
      8. OPTION SETTLEMENT
      9. OPTIONS CYCLES
    2. CHAPTER 2: Probability Distributions
      1. THE GAUSSIAN DISTRIBUTION
      2. APPLICATION TO THE REAL WORLD
      3. RISK-ADJUSTED RETURNS
      4. HIGH-PROBABILITY TRADING
      5. LOW-PROBABILITY TRADING
      6. OPTIONS TRADING MYTHS
      7. WHAT IS A CONSERVATIVE TRADE?
    3. CHAPTER 3: Options Pricing and Implied Volatility
      1. THE BLACK-SCHOLES PRICING MODEL
      2. THE GREEKS
      3. IMPLIED VOLATILITY
      4. BUILDING THE PRICE OF AN OPTION
      5. A CLOSER LOOK AT THE GREEKS
      6. HOW WILL WE USE THE GREEKS?
    4. CHAPTER 4: Vertical Spreads
      1. BUILDING THE VERTICAL SPREAD
      2. EFFECTS OF IMPLIED VOLATILITY
      3. EARLY EXERCISE
      4. EXPIRATION AND EXERCISE
      5. MARGIN REQUIREMENTS
      6. APPLICATION OF PROBABILITY CALCULATIONS
      7. RISK/REWARD AND PROBABILITY OF SUCCESS
  10. PART 2: Options Strategies for Income Generation
    1. CHAPTER 5: Using Options to Boost Income in a Stock Portfolio
      1. THE CLASSIC COVERED CALL STRATEGY
      2. STRATEGIC CONSIDERATIONS
      3. THE NOTORIOUS SELLING NAKED PUTS STRATEGY
      4. SELLING NAKED PUTS FOR INCOME
      5. BUYING STOCKS AT A DISCOUNT
      6. COMBINING THE COVERED CALL WITH SELLING NAKED PUTS
      7. EARLY EXERCISE
      8. RISK MANAGEMENT
      9. THE ACHILLES’ HEEL OF DIRECTIONAL STRATEGIES
    2. CHAPTER 6: Calendar and Double Calendar Spreads
      1. VEGA RISK AND CALENDAR SPREADS
      2. VOLATILITY SKEWS
      3. SEARCHING FOR CALENDAR CANDIDATES
      4. ENTERING AND MANAGING THE TRADE
      5. EARLY EXERCISE
      6. ADJUSTMENTS
      7. OUT-OF-THE-MONEY CALENDAR SPREADS
      8. DOUBLE CALENDAR SPREADS
      9. DETERMINING THE OPTIMAL STRIKE PRICES
      10. TRADE MANAGEMENT AND ADJUSTMENTS
      11. MULTIPLE CALENDAR SPREAD POSITIONS
    3. CHAPTER 7: Double Diagonal Spreads
      1. DIAGONAL SPREADS
      2. DOUBLE DIAGONAL SPREADS
      3. MANAGING THE TRADE
      4. DOUBLE DIAGONALS VS. DOUBLE CALENDARS
    4. CHAPTER 8: Butterfly Spreads
      1. AT-THE-MONEY AND OUT-OF-THE-MONEY BUTTERFLY SPREADS
      2. IRON BUTTERFLY SPREADS
      3. THE BROKEN-WING BUTTERFLY
      4. MARGIN REQUIREMENTS
      5. TRADE MANAGEMENT
      6. CLOSING BUTTERFLY SPREADS
      7. BUTTERFLY SPREADS AS ADJUSTMENTS
    5. CHAPTER 9: Condor Spreads
      1. THE BASIC CONDOR SPREAD
      2. THE OPPORTUNISTIC MODEL
      3. THE INSURANCE MODEL
      4. IRON CONDOR SPREADS
      5. VEGA RISK AND THE CONDOR
      6. THE SHORT-TERM IRON CONDOR
      7. THE LONG-TERM IRON CONDOR
      8. CAPITAL MANAGEMENT
      9. RISK MANAGEMENT
      10. ADJUSTMENT TECHNIQUES
      11. ADJUSTMENT PROS AND CONS
      12. ADJUSTMENT CASE STUDIES
      13. MANAGING THE IRON CONDOR WITH THE GREEKS
      14. ADVANCED ADJUSTMENT TECHNIQUES
      15. IRON CONDOR TRADING SYSTEMS
      16. BUTTERFLIES AND CONDORS ARE COUSINS
    6. CHAPTER 10: Delta-Neutral Trading Strategies
      1. RISK MANAGEMENT SYSTEMS
      2. CHALLENGING MARKETS FOR THE DELTA-NEUTRAL TRADER
      3. TWO DISTINCT TRADING PHILOSOPHIES
      4. THE “SECRET” OF SUCCESS
    7. CHAPTER 11: Make Your Trading a Business
      1. GETTING STARTED
      2. MANAGING LOSSES
      3. THE TRADING PLAN
      4. MONEY MANAGEMENT
      5. THE PSYCHOLOGY OF TRADING
      6. LIVING WITH THE TWO-HEADED MONSTER
      7. REQUIRED TOOLS FOR THIS BUSINESS
      8. WHAT’S NEXT?
  11. APPENDIX: Answers to the Chapter Exercises
    1. CHAPTER 2
    2. CHAPTER 3
    3. CHAPTER 4
    4. CHAPTER 5
    5. CHAPTER 6
    6. CHAPTER 7
    7. CHAPTER 8
    8. CHAPTER 9
  12. Glossary
  13. Index