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Trading Options For Dummies, 2nd Edition

Book Description

Navigate options markets and bring in the profits

Thinking about trading options, but not sure where to start? This new edition of Trading Options For Dummies starts you at the beginning, explaining the common types of options available for trading and helps you choose the right ones for your investing needs. You'll find out how to weigh option costs and benefits, combine options to reduce risk, build a strategy that allows you to gain no matter the market conditions, broaden your retirement portfolio with index, equity, and ETF options, and so much more.

Options are contracts giving the purchaser the right to buy or sell a security, such as stocks, at a fixed price within a specific period of time. Because options cost less than stock, they are a versatile trading instrument, while providing a high leverage approach to trading that can limit the overall risk of a trade or provide additional income. If you're an investor with some general knowledge of trading but want a better understanding of risk factors, new techniques, and an overall improved profit outcome, Trading Options For Dummies is for you.

  • Helps you determine and manage your risk, guard your assets using options, protect your rights, and satisfy your contract obligations

  • Provides expert insight on combining options to limit your position risk

  • Offers step-by-step instruction on ways to capitalize on sideways movements

  • Covers what you need to know about options contract specifications and mechanics

  • Trading options can be a great way to manage your risk, and this hands-on, friendly guide gives you the trusted and expert help you need to succeed.

    Table of Contents

      1. Cover
      2. Title Page
      3. Introduction
        1. About This Book
        2. Foolish Assumptions
        3. Icons Used in This Book
        4. Beyond the Book
        5. Where to Go from Here
      4. Part I: Getting Started
        1. Chapter 1: Options Trading and the Individual Investor
          1. Taking Your Own Financial and Strategic Pulse
          2. Understanding Options
          3. Differentiating Between Option Styles
          4. Using Options In Challenging Markets
        2. Chapter 2: Introducing Options
          1. Understanding Option Contracts
          2. Valuing Options
          3. Making Sense of Options Mechanics
          4. Birthing Option Contracts
          5. Keeping Some Tips in Mind
        3. Chapter 3: Trading Places: Where the Action Happens
          1. The U.S. Options Exchanges
          2. Navigating the Markets
          3. Weighing Option Costs and Benefits
          4. Grasping Key Option Pricing Factors
        4. Chapter 4: Option Risks and Rewards
          1. Understanding Your Trading Risks
          2. Reaping Your Rewards
          3. Profiling Risk and Reward
      5. Part II: Evaluating Markets, Sectors, and Strategies
        1. Chapter 5: Analyzing Mood Swings in the Market
          1. A Few Words About Select Macro Factors
          2. Assessing the Market’s Bias
          3. Watching Call and Put Activity
          4. Using Volatility to Measure Fear
          5. Applying Breadth and Sentiment Tools
        2. Chapter 6: Sector Analysis: Technical and Fundamental
          1. Getting Technical with Charts
          2. Identifying Relatively Strong Sectors
          3. Using Sector Volatility Tools
          4. Projecting Prices for Trading
        3. Chapter 7: Practicing Before You Swing
          1. Monitoring Option Greek Changes
          2. Paper Trading a Trading Strategy
          3. Using Trading Systems
          4. Shifting from Knowledge to Mastery
        4. Chapter 8: Designing A Killer Trading Plan
          1. Managing Your Costs
          2. Optimizing Order Execution
      6. Part III: What Every Trader Needs to Know About Options
        1. Chapter 9: Getting to Know Different Option Styles
          1. Nailing Down Index Options
          2. Watching Out for Style Risk
          3. Exercising Your Options American Style
          4. Exercising Your Options the Euro Way
          5. Satisfying Option Obligations
          6. Breaking It Down: American-Style Index Options
        2. Chapter 10: Protecting Your Portfolio with Options
          1. Putting Protection on Long Stock
          2. Limiting Short Stock Risk with Calls
          3. Hedging Your Bets with Options
          4. Avoiding Adjusted Option Risk
        3. Chapter 11: Increasing Profit Potential and Decreasing Risk
          1. Leveraging Assets to Reduce Risk
          2. Combining Options to Reduce Risk
        4. Chapter 12: Combination Strategies: Spreads and Other Wild Things
          1. Combining Options with Stocks
          2. Varying Vertical Spreads
        5. Chapter 13: ETFs, Options, and Other Sneaky Tricks
          1. Exploring the Exchange-Traded Fund
          2. Reducing Portfolio Volatility with ETFs
          3. Tilting Your Portfolio with Sector ETFs
      7. Part IV: Advanced Strategies for Options Traders
        1. Chapter 14: Making Money without Worrying About the Market’s Direction
          1. Limiting Directional Risk
          2. Neutral View versus Neutral Position
          3. Trading with Delta
          4. Understanding Trade Adjustments
        2. Chapter 15: Letting Volatility Lead You to Trading Opportunities
          1. Analyzing Implied Volatility Levels
          2. Understanding Ratio Spreads
          3. Using Ratio Backspreads
        3. Chapter 16: Trading Profitably When Markets Move Sideways
          1. Winning Positions in Sideways Markets
          2. Understanding Butterfly Positions
          3. Understanding Condor Positions
      8. Part V: The Part of Tens
        1. Chapter 17: Ten Top Option Strategies
          1. Married Put
          2. Collar
          3. Long Put Trader
          4. LEAPS Call Investor
          5. Diagonal Spread
          6. Bear Call Credit Spread
          7. Straddle
          8. Call Ratio Backspread
          9. Put Ratio Backspread
          10. Long Put Butterfly
        2. Chapter 18: Ten Do’s and Don’ts in Options Trading
          1. Do Focus on Managing Risk
          2. Don’t Avoid Losses
          3. Do Trade with Discipline
          4. Don’t Expect to Remove Your Emotions
          5. Do Have a Plan
          6. Do Be Patient
          7. Don’t Suffer from Analysis Paralysis
          8. Do Take Responsibility for Your Results
          9. Don’t Stop Learning
          10. Do Love the Game
      9. About the Authors
      10. Author’s Acknowledgments
      11. Cheat Sheet
      12. Connect with Dummies
      13. End User License Agreement