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2018 | Buch

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The Complete Options Trader

A Strategic Reference for Derivatives Profits

verfasst von: Michael C. Thomsett

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

Options traders rely on a vast array of information concerning probability, risk, strategy components, calculations, and trading rules. Traders at all levels, as well as portfolio managers, must refer to numerous print and online sources, each source only providing part of the information they need. This is less than ideal, as online sources tend to be basic, simplified, and in some cases incorrect. Print sources, on the other hand, are mostly focused on a very narrow range of strategies or trading systems. Up until now, there has been no single source to provide a comprehensive reference for the serious trader.

The Complete Options Trader is that much-need comprehensive reference, a compilation of the many attributes options traders need.

Thomsett lays out a rich and complete guide to 100 strategies, including profit and loss calculations, illustrations, examples, and much more. A thorough evaluation of these strategies (and the rewards and risk involved) demonstrates how a broad approach to analytically using options can and does enhance portfolio profits with lower levels of risk.

The book also features a complete glossary of terms used in the options industry, the most comprehensive glossary of this nature currently available.

All too often, the attributes of options trading are poorly understood; risk is ignored or over-simplified; hedging is not folded into a strategic evaluation; and options traders shun the value of holding equity positions. No longer—if options traders rely on this comprehensive guide as the reference for the industry.

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract

Options: This highly specialized and complex industry should be all about risk analysis, hedging, and management of an equity portfolio. All too often, the attributes of options trading are poorly understood, risk is ignored or simplified, hedging is not folded into a strategic evaluation, and options traders shun the value of holding equity positions.

Michael C. Thomsett

Market Overview

Abstract

The options market is highly specialized, intricate, and often misunderstood. The reputation of options as high risk is only partially deserved. In fact, options products may be structured to suit any investment profile, from very high risk to very conservative, or to be used strictly to hedge risks in equity positions.

Michael C. Thomsett

Market Risks

Abstract

Are options high-risk trading devices? Many who invest or trade avoid options in the belief that they are speculative, exotic, and even dangerous. However, as the options industry has evolved over the years, it has outgrown its reputation as a speculative, “shoot from the hip” form of leveraged trading. The modern options industry has many faces, from the speculative trader willing to accept extraordinary levels of risk, all the way to the most conservative investor or portfolio manager seeking safe risk hedges.

Michael C. Thomsett

Option Strategies

Abstract

The sheer number of options strategies, when arranged alphabetically, presents ease of access but does not fully describe the varying levels of risk they entail. For that, it is necessary to track the payoff diagrams, examples, and amounts of capital required to put a strategy into place. In the following examples, actual stock prices and options premiums have been used. However, identification of a company or date of the options expirations is not necessary; the observations presented in this chapter apply in all cases, and examples are only a starting point for understanding the attributes of each strategy: long or short positions, risk levels, profit potential, and a range of possible actions that can be taken before expiration—rolling, closing, or exercising positions.

Michael C. Thomsett

Option Glossary

Abstract

The options industry is characterized by a wide array of specialized terms and expressions. These are crucial because terms distinguish between two or more selections: long or short, enter or exit, open or close, bid or ask, and call or put, for example. Additionally, the dozens of strategies (shown in chapter “Option Strategies”) further need definition in order for traders to ensure that appropriate risk levels are selected for trading. The jargon unique to options trading, once mastered, serves the purpose of clarification for this complex and specialized trading industry.

Michael C. Thomsett

Elements of Value

Abstract

The cause and effect of option premium value is elusive to many traders. Many factors come into play, and no simple formula can predict how premium values will change. The influencing factors include:

time to expiration
proximity between option strike price and underlying stock current market value
direction of change in price (in or out of the money)
volatility of the underlying stock (historical volatility)
implied volatility of the option

Michael C. Thomsett

Return Calculations

Abstract

Figuring out profitability for a particular strategy is not as simple as it sounds at first glance. The variations of both outcome and calculation are complex, and this makes valid comparisons difficult.

Michael C. Thomsett

Options and Stock Selection

Abstract

The selection of options based on appropriate risk levels and stocks makes more sense than the selection of stocks to maximize option returns. In other words, any position combining option and stock positions should be based on well-selected stocks held in a trader’s portfolio as long-term investments. The alternative, for those interested solely in speculating in options, is to (a) accept higher-risk positions from speculation trading, (b) hedge high-risk positions with option-based coverage, or (c) be aware that long positions in stock are taken up not as investments but as hedges for option positions.

Michael C. Thomsett

Option Taxation

Abstract

Taxes are complex no matter what kinds of investments are involved. However, if you trade options, the complexity of taxation is exponentially greater. Many rules apply only to option trading, and poor planning or unawareness of the rules may lead to expensive mistakes. These mistakes may even include the loss of favorable long-term capital gains rates on stock profits even when positions were open for more than the required 12 months.

Michael C. Thomsett

Backmatter

Titel: The Complete Options Trader
verfasst von: Michael C. Thomsett
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-76505-1
Print ISBN: 978-3-319-76504-4
DOI: https://doi.org/10.1007/978-3-319-76505-1