Summary

In The Bible of Options Strategies, options trader Guy Cohen systematically presents today's 60 most effective strategies for trading options: how and why they work, when they're appropriate, and exactly how to use each one - step by step. The only comprehensive reference of its kind, this book will help you identify and implement the optimal strategy for every opportunity, trading environment, and goal. It's practical from start to finish: modular, easy to navigate, and thoroughly cross-referenced, so you can find what you need fast, and act before your opportunity disappears. Cohen systematically covers all five key areas of options strategy: income strategies, volatility strategies, sideways market strategies, leveraged strategies, and synthetic strategies. Even the most complex techniques are explained with unsurpassed clarity - making them accessible to any trader with even modest options experience.

Author Biography

Guy Cohen is the author of the best-selling trading books: Options Made Easy and The Bible of Options Strategies. He has extensive experience in the options and stock markets and his clients include NYSE Euronext, the largest stock exchange in the world. Guy is also the creator of trading products Flag-Trader, OptionEasy, and Illuminati-Trader. Specializing in trading applications Guy has developed comprehensive trading and training models, all expressly designed for maximum user-friendliness. An entertaining speaker, Guy has an MBA (Finance) from City University Cass Business School, London.

Preface

xxxi

Acknowledgments

xxxix

About the Author

The Four Basic Options Strategies

(20)

Long Call

(4)

Short (Naked) Call

(3)

Long Put

(4)

Short (Naked) Put

(5)

Income Strategies

(68)

Covered Call

(5)

Short (Naked) Put---Refer to Chapter 1 (1.4)

(1)

Bull Put Spread

(4)

Bear Call Spread

(4)

Long Iron Butterfly

(5)

Long Iron Condor

(5)

Covered Short Straddle

(5)

Covered Short Strangle

(6)

Calendar Call

(6)

Diagonal Call

(6)

Calendar Put

(7)

Diagonal Put

(6)

Covered Put (Also Known as a Married Put)

(7)

Vertical Spreads

(30)

Bull Call Spread

(4)

Bear Put Spread

(5)

Bull Put Spread---Refer to Chapter 2 (2.3)

(1)

Bear Call Spread---Refer to Chapter 2 (2.4)

(1)

Bull Call Ladder

(5)

Bull Put Ladder

104

(5)

Bear Call Ladder

109

(5)

Bear Put Ladder

114

(5)

Volatility Strategies

119

(56)

Straddle

121

(6)

Strangle

127

(5)

Strip

132

(5)

Strap

137

(6)

Guts

143

(5)

Short Call Butterfly

148

(4)

Short Put Butterfly

152

(5)

Short Call Condor

157

(4)

Short Put Condor

161

(5)

Short Iron Butterfly

166

(4)

Short Iron Condor

170

(5)

Sideways Strategies

175

(44)

Short Straddle

176

(4)

Short Strangle

180

(4)

Short Guts

184

(4)

Long Call Butterfly

188

(5)

Long Put Butterfly

193

(5)

Long Call Condor

198

(5)

Long Put Condor

203

(5)

Modified Call Butterfly

208

(4)

Modified Put Butterfly

212

(5)

Long Iron Butterfly---Refer to Chapter 2 (2.5)

217

(1)

Long Iron Condor---Refer to Chapter 2 (2.6)

217

(2)

Leveraged Strategies

219

(20)

Call Ratio Backspread

219

(5)

Put Ratio Backspread

224

(5)

Ratio Call Spread

229

(4)

Ratio Put Spread

233

(6)

Synthetic Strategies

239

(54)

Collar

240

(6)

Synthetic Call

246

(4)

Synthetic Put

250

(4)

Long Call Synthetic Straddle

254

(4)

Long Put Synthetic Straddle

258

(5)

Short Call Synthetic Straddle

263

(4)

Short Put Synthetic Straddle

267

(4)

Long Synthetic Future

271

(4)

Short Synthetic Future

275

(3)

Long Combo

278

(4)

Short Combo

282

(4)

Long Box

286

(7)

Taxation for Stock and Options Traders

293

(10)

Tax on Stocks

294

(2)

Tax on Options

296

(7)

Appendix A Strategy Table

303

(14)

Appendix B Glossary

317

(14)

Index

331

Supplemental Materials

What is included with this book?

The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

The Used, Rental and eBook copies of this book are not guaranteed to include any supplemental materials. Typically, only the book itself is included. This is true even if the title states it includes any access cards, study guides, lab manuals, CDs, etc.

Excerpts

Preface Preface How to Use This Book Options give investors so much flexibility that when it came to writing a book namedThe Bible of Options Strategies,I found myself cursing just how flexible they can be! Sixty strategies is a lot of ground to cover, but in reviewing them all again (I've done it several times already!), I was reminded of the beauty of these amazing trading instruments. Options give us the ability to do so many things--they enable us to configure our investment aims in any way we like. The benefits of options are often trotted out to new students or prospective customers as the first salvo of an up-sell campaign, but they're worth looking at again, this time from apracticalpoint of view. Options enable us to: Control more assets for less money. One option contract represents 100 shares of stock and is usually a fraction of the cost of what you'd pay for the equivalent number of shares. For example, ABCD stock is priced at $26.20 on June 2, 2004. An option tobuyABCD shares (a call option) might be priced at $2.60. Because one contract represents 100 shares, we can therefore buy one ABCD call contract for $260.00 100 * 2.60. The alternative would be to buy 100 shares of the stock for a total sum of $2,620. So, in this example, we can buy ABCD calls options for around 10% of the stock price in order to control $2,620 of ABCD stock until the appropriate expiration date of the option. Trade with leverage. Because our cost basis is so low, the position is much more sensitive to the underlying stock's price movements, and hence our percentage returns can be so much greater. Trade for income. We can design strategies specifically for the purpose of generating income on a regular basis. Profit from declining stocks. We can use puts and calls to ensure that we can make money if the stock goes up, down, or sideways. Profit from volatility or protection against various factors. Different options strategies protect us or enable us to benefit from factors such as time decay, volatility, lack of volatility, and more. Reduce or eliminate risk. Options enable us to substantially reduce our risk of trading, and in certain rare cases, we can even eliminate risk altogether, albeit with the trade-off of very limited profit potential! So, with all the different benefits of options, why on earth would tradersnotbe curious to learn more about them? Well, for a start, the initial barrier to entry is quite high, in that options are reasonably complex instruments to understand for the first time. After you're over that hurdle, though, they become more and more fascinating! The other reason is that there is such a multitude of other investment securities for people to choose from, many will pick what seems like the simplest, rather than what may fit their investment aims the best. Given that options can be a challenge, it's my job to make life as simple as possible for you. One of the ways in which I do this is to break things down into pictures so we canseewhat we're doing. As soon as we can see what we're doing, life becomes much clearer when you're creating options strategies. Everything to do with OptionEasy and all my material is designed to be visual-friendly. This goes back to when I started to learn all about options and the fact that the penny only started to drop when I converted the concepts into pictures. All of a sudden, everything fit into place, and I started to be able to extend logic faster and further than before. This book is designed to be a reference book, one that you can pick up any time to learn about and understand a s