What is included with this book?
Preface xi
Introduction: Why Traders Fail 1
Is Failure a Flaw? 2
Blaming Emotions 2
Blaming Systems 3
Successful Traders Versus Successful Trading 5
Trading for a Living 6
Trade for the Right Reasons 6
The Ability to Duplicate a Strategy 7
Correlation Versus Causation 7
Don’t Trade to Make Money 9
Leverage 10
What Kind of Trader Are You? 10
A Single Difference Goes a Long Way 11
A Limited Worldview 13
Chapter 1 Understanding Options 15
What Is a Stock? 15
What Is an Option? 18
The Bet You Wouldn’t Make 18
The Options Trader’s Toolbox 22
Chapter 2 What Is Price? 33
How a Stock Trader Looks at Stock Price 33
How Options Traders Look at Stock Price 37
How an Options Trader Looks at an Option’s Price 48
Chapter 3 Pure Options Trading: Building Your Own Trade 67
Basic Greek Concepts 69
Build 1: Making a Directionless Trade 74
Build 2: Reducing Your Risk 78
Build 3: Augmented Returns 88
Bending the Curve 95
The Options Trader’s Toolbox: Synthetic Straddles 96
Evolving a Trade 98
In-, At-, and Out-of-the-Money Trades 98
Chapter 4 Situational Trading 99
Known Knowns 100
Analyzing Situations 105
Building a Directional Trade 106
Known Unknowns 126
Unknown Unknowns 137
Chapter 5 Risk Management 157
Responsibility in Trading 157
Strategy Is Risk Management 159
How a Stock Trader Measures Risk 160
Defined Risk for Options Traders 163
Layering and Unlayering Trades 164
Trades Cannot Be Fixed, Just Replaced 165
Portfolio Risk 166
Concluding Remarks 168
Appendix: Quantum Physics and Trading—The Price Uncertainty Principle 171
Index 175
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