Option Spread Trading A Comprehensive Guide to Strategies and Tactics
Produktdetaljer
Biografisk notat
RUSSELL RHOADS is an instructor for the Options Institute at the Chicago Board Options Exchange. He conducts about ninety classes a year and, in addition, conducts webinars on behalf of the CBOE and a variety of brokerage firms. Rhoads's twenty-year trading career included positions at a variety of trading firms and hedge funds. His background includes trading and analysis, and he is author of Candlestick Charting For Dummies. Rhoads graduated the University of Memphis with a MS in finance and has a master's certificate in financial engineering from the Illinois Institute of Technology.
When dealing with option spreads your looking to purchase one option in conjunction with the sale of another option. If managed properly, these spreads can provide experienced investors with the potential for large returns without undertaking a great deal of risk.
Option Spread Trading provides a comprehensive, yet easy-to-understand explanation of option spreads, and shows you how to select the best spread strategy for any given market outlook. Along the way, author Russell Rhoads discusses spread strategies that can be used to profit from a strong up or down directional move in a stock, a stagnant market, or a highly volatile market. He also details how you can harness the leverage of options to create a low-risk position that provides the potential for a big profit.
- All manner of spreads are covered, from calendar and horizontal spreads to vertical and diagonal spreads
- Highlights how you can monitor and adjust an existing spread position and provides tips on how to exit a spread trade
- Includes exercises and examples to test and reinforce your knowledge of the concepts presented
Option spread trading has become increasingly popular with active traders and investors. Gain a better understanding of this powerful approach with Option Spread Trading as your guide.
Preface xi
Acknowledgments xiii
CHAPTER 1 Essential Option Knowledge 1
The Option Basics 1
In-At-Out of the Money 5
Intrinsic and Time Value 6
Spread Basics 8
The Greeks 9
Payoff Tables and Diagrams 10
Option Pricing Calculators 12
CHAPTER 2 Spreads Using an Underlying Security 15
Covered Call 15
Covered Call Using LEAPSQR 22
Systematic Covered Call Strategies 25
Cash-Secured Put 26
Systematic Cash-Secured Put 31
Protective Put 32
The Collar 33
CHAPTER 3 Synthetic Positions 37
Put-Call Parity 39
Synthetic Long Positions 40
Synthetic Short Positions 44
Arbitrage in Put-Call Parity 50
Individuals Using Put-Call Parity 52
CHAPTER 4 The Greeks 55
Price-Related Greeks 55
Time-Related Greek 61
Volatility-Related Greek 65
Interest Rate-Related Greek 67
Conclusion 69
CHAPTER 5 Straddles 71
Long Straddle Mechanics 72
Short Straddle 81
CHAPTER 6 Strangles 89
Long Strangle Mechanics 89
Short Strangle Mechanics 98
CHAPTER 7 Bull Spreads 107
Bull Put Spread 107
Bull Call Spread 114
CHAPTER 8 Bear Spreads 121
Bear Call Spread 121
Bear Put Spread 127
CHAPTER 9 Butterfly Spreads 135
Introduction to Butterfly Spreads 136
Long Call Butterfly 136
Long Put Butterfly 139
Iron Butterfly 142
Short Straddle Comparison 146
Short Call Butterfly 149
Short Put Butterfly 152
Reverse Iron Butterfly 154
Reverse Iron Butterfly versus Straddle 156
CHAPTER 10 Condor Spreads 159
Introduction to Condor Spreads 159
Long Call Condor 160
Long Put Condor 163
Iron Condor 166
Iron Condor versus Short Strangle 170
Short Condor Spreads 172
Reverse Iron Condor 176
Reverse Iron Condor versus Long Strangle 179
CHAPTER 11 Ratio Spreads 183
Call Ratio Spread 184
Put Ratio Spread 189
Ratio Spread Comparisons 192
CHAPTER 12 Backspreads 199
Call Backspread 199
Put Backspread 203
Backspread Comparisons 207
CHAPTER 13 The Stock Repair Strategy 213
Doubling Down on a Position 214
The Stock Repair Trade 215
CHAPTER 14 Calendar Spreads 219
Time Value Effect 220
Long Call Calendar 221
Long Put Calendar 224
Combined Calendar Spread 227
CHAPTER 15 Diagonal Spreads 231
Call Diagonal Spread 231
LEAPS Call Diagonal Spread 234
Put Diagonal Spread 237
LEAPS Put Diagonal Spread 239
Double Diagonal Spread 241
CHAPTER 16 Delta Neutral Trading 245
Delta Review 245
Delta-Neutral Positions 246
Gamma 250
Market Maker Trading 251
CHAPTER 17 Executing a Spread Trade 255
Executing a Stock or Option Trade 256
A Single Option Spread 258
A Spread with Two Options 260
A Spread with Multiple Legs 261
Legging into a Spread Trade 265
About the Author 269
Index 271
Option Spread TRADING
The options industry has experienced incredible growth in recent years. With multiple exchanges now vying for orders from the public, the speed of execution has increased while the cost of trading options has decreased. This has leveled the playing field to the point where individual traders can not only compete in the options arena, but also capture consistent profits.
Nobody understands this better than author Russell Rhoadsan instructor for the Options Institute at the CBOEwho has helped thousands of people successfully incorporate various options strategies into their everyday trading endeavors.
Now, with Option Spread Trading, he shares his extensive experience in this field and reveals what it takes to put the power of option spreads to work for you. Before getting into a detailed discussion of spread trades, this reliable resource opens with a quick overview of essential option knowledge, lays out the mechanics of putting on very basic positions involving two trading instruments, explores different approaches to creating similar payoffs, and covers the "Greeks."
From there, you'll be introduced to a variety of spread strategies, with each chapter focusing on a specific one, and discover how to choose and use the best strategies for certain situations.
- STRADDLES
- STRANGLES
- BULL AND BEAR SPREADS
- BUTTERFLY SPREADS
- CONDOR SPREADS
- RATIO SPREADS
- BACKSPREADS
- CALENDAR SPREADS
- DIAGONAL SPREADS
Rounding out this comprehensive guide to option spread trading are some specialized chapters that address the concept of Delta-neutral tradingwith an example of how market makers basically use isolating price risk when providing liquidity to the market placeand the issues involved in executing a spread trade.
Designed in a modular format with each chapter laid out in a similar fashion, including examples of how each spread would be constructed and key levels to focus on, Option Spread Trading is a flexible guide that will help you get the most out of every option you trade.
Nobody understands this better than author Russell Rhoads—an instructor for the Options Institute at the CBOE—who has helped thousands of people successfully incorporate various options strategies into their everyday trading endeavors.
Now, with Option Spread Trading, he shares his extensive experience in this field and reveals what it takes to put the power of option spreads to work for you. Before getting into a detailed discussions of spread trades, this reliable resource opens with a quick overview of essential option knowledge, lays out the mechanics of putting on very basic positions involving two trading instruments, explores different approaches to creating similar payoffs, and covers the "Greeks."
From there, you'll be introduced to a variety of spread strategies, with each chapter focusing on a specific one, and discover how to choose and use the best strategies for certain situations.
-
STRADDLES
-
STRANGLES
-
BULL AND BEAR SPREADS
-
BUTTERFLY SPREADS
-
CONDOR SPREADS
-
RATIO SPREADS
-
BACKSPREADS
-
CALENDAR SPREADS
-
DIAGONAL SPREADS
Rounding out this comprehensive guide to option spread trading are some specialized chapters that address the concept of Delta-neutral trading—with an example of how market makers basically use isolating price risk when providing liquidity to the market place—and the issues involved in executing a spread trade.
Designed in a modular format with each chapter laid out in a similar fashion, including examples of how each spread would be constructed and key levels to focus on, Option Spread Trading is a flexible guide that will help you get the most out of every option you trade.
Produktdetaljer
Biografisk notat
RUSSELL RHOADS is an instructor for the Options Institute at the Chicago Board Options Exchange. He conducts about ninety classes a year and, in addition, conducts webinars on behalf of the CBOE and a variety of brokerage firms. Rhoads's twenty-year trading career included positions at a variety of trading firms and hedge funds. His background includes trading and analysis, and he is author of Candlestick Charting For Dummies. Rhoads graduated the University of Memphis with a MS in finance and has a master's certificate in financial engineering from the Illinois Institute of Technology.