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Über dieses Buch

An advanced strategic approach using options to reduce market risks while augmenting dividend income, this title moves beyond the basics of stocks and options. It shows how the three major segments (stocks, dividends, and options) are drawn together into a single and effective strategy to maximize income while eliminating market risk.

Inhaltsverzeichnis

Frontmatter

Introduction: The Quest for High Return and Low Risk

Abstract
Options traders continually seek the best of both worlds—high return and low risk. A majority of the strategies they follow are not going to produce this desired result, not only in the options world but also in any market. Risk and return are two sides of the same trading coin: The higher the risk, the higher the potential for high return.
Michael C. Thomsett

Chapter 1. The Dividend Portfolio, an Overview

Abstract
Dividends are perceived in many ways, some very inaccurately.
Michael C. Thomsett

Chapter 2. Managing and Reducing Risk with Options

Abstract
Most traders acknowledge that options market risks are potentially high and come in many forms, unique to that market. However, the nature of risk is widely misunderstood as well. For the options market, several key risk discussions beyond the inherent market risk and short side risk potential need to be discussed. This lays the groundwork for a majority of options strategies and may also help traders to appreciate on a deeper level the range of risk issues they face.
Michael C. Thomsett

Chapter 3. The Advantage of the Covered Call

Abstract
The covered call. This is a long-time favorite among options traders, and for many, the strategy of first choice. It also represents one of the important components of the risk-free portfolio.
Michael C. Thomsett

Chapter 4. Downside Protection, the Insurance Put

Abstract
Stock selection is a starting point for every portfolio. Even when you pick stocks expertly, however, market risk is never eliminated. A long portfolio is never completely safe, and this points to the value of puts to insure against downside risk.
Michael C. Thomsett

Chapter 5. The Collar: Removing All of the Risk

Abstract
Do you need to diversify your portfolio? Traditional wisdom tells you that diversification is essential in order to manage risk. However, the collar could contradict this traditional “rule” of investing. If you focus on ownership of shares in a company yielding exceptionally high dividends, would you place all of your capital in shares of that company? You might, except for the need for diversification. This chapter challenges this rule and demonstrates why you might not need to spread money around at all, and that it could be more profitable to put all of your eggs in one basket and then set up an ironclad protective strategy so that market risk is eliminated completely.
Michael C. Thomsett

Chapter 6. Rolling the Stock Positions: Turning 4% into 12%

Abstract
The old-style buy-and-hold approach to investing was based on one assumption: buying high-quality companies and holding stock for many years led to slowly evolving but consistent profits. The blue chips of the past were believed to give investors an ironclad assurance of wealth building that could not be matched elsewhere.
Michael C. Thomsett

Chapter 7. Examples of the Basic Strategy

Abstract
The dividend collar demands a lot of research; however, the risk-free, double-digit returns that are possible through this strategy justify the effort. For conservative investors who want to avoid risk while increasing net returns, the basic strategy works consistently to accomplish these portfolio goals.
Michael C. Thomsett

Chapter 8. Modification: The Installment Collar Approach

Abstract
The dividend collar contains elegance and simplicity because it eliminates market risk while providing high net returns. At the same time, because option profits are not the key, using soon-to-expire contracts is convenient and practical. Few other options strategies work as well.
Michael C. Thomsett

Chapter 9. Expanding into the Ratio Write Dividend Collar

Abstract
The basic dividend collar works to (1) eliminate downside risk, (2) create double-digit income from dividend yield, and (3) use short-term expiration to your advantage. It is one of the few option strategies in which exercise is welcomed (after the ex-dividend date).
Michael C. Thomsett

Chapter 10. More Expansion, Creating the Variable Ratio Write Dividend Collar

Abstract
The last chapter demonstrated that only in rare instances is a ratio write likely to combine high dividend yield with relatively low risk. The risk level is unavoidable, and even the fact that expiration will occur in less than one month might not be reason enough to accept the risk level.
Michael C. Thomsett

Chapter 11. Modifying the Strategy with Synthetic Stock Positions

Abstract
The distinction between a collar and a synthetic stock position is subtle. A collar usually involves two strikes, a short call, and a long put, both out of the money (OTM). A synthetic stock position is based on the same strike for both.
Michael C. Thomsett

Epilogue: The Great Value in Patience

Abstract
Knowledge, research, analytical skills, and patience—all of these are essential traits for successful options trading. But all of these are secondary to one unavoidable and necessary trait: self-discipline.
Michael C. Thomsett

Backmatter

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