The Complete Guide to Option Strategies Advanced and Basic Strategies on Stocks, ETFs, Indexes and Stock Index Futures

by Mullaney, Michael

• ISBN13: 9781118268278
• ISBN10: 111826827X
• Edition: 1st
• Format: eBook
• Copyright: 2012-03-30
• Publisher: Wiley

Summary

Important insights into effective option strategies

In The Complete Guide to Option Strategies, top-performing commodity trading advisor Michael Mullaney explains how to successfully employ a variety of option strategies, from the most risky--selling naked puts and calls--to more conservative strategies using covered positions. The author covers everything from options on stocks, exchange-traded funds, stock indexes, and stock index futures to essential information on risk management, option "Greeks," and order placement. The book provides numerous tables and graphs to benefit beginning and experienced traders. Written by a CTA who has successfully employed various options strategies to generate market-beating returns, The Complete Guide to Option Strategies will be an important addition to any trader's library.

Michael D. Mullaney (Jacksonville, FL) is a high-ranking commodity trading advisor who specializes in option selling strategies.

Author Biography

Michael D. Mullaney has traded equity and futures options utilizing a broad range of strategies and instruments, including options on stocks, stock and bond ETFs, indexes, and stock index futures. Mullaney executes option buying and selling strategies but concentrates most of his efforts on writing far out-of-the-money options by using strategies that can profit in rising, declining, and sideways markets. Mullaney is a principal of a commodity trading advisor and a certified public accountant. He has been interviewed on national business radio, featured by national trading magazines, was formerly a partner at KPMG, vice president of a corporate tax department, instructor for a law school course, contributor to a book on taxation, and author of six articles on merger and acquisition issues. He can be contacted at [e-mail].

Table of Contents

Preface.

Acknowledgments.

PART ONE Learning the Fundamentals.

Chapter 1 Getting Ready to Trade.

Why Trade Options?

Developing a Game Plan.

What is an Option?

Defining Key Terms.

Final Thoughts.

Chapter 2 Option Fundamentals.

Overview.

Opening and Closing Positions.

Option Buying.

Option Selling.

Spreads.

Bid/Ask Spread.

Option Chain.

Final Thoughts.

Chapter 3 What Determines an Option's Price?

Overview.

Factors Affecting Option Pricing.

Forecasting Option Prices.

Final Thoughts.

Chapter 4 Tools of The Trade—Greeks.

Overview: Greek Basics.

Position Greeks.

Converting an Option Chain to Greeks.

More on Delta.

Final Thoughts.

Chapter 5 Buying versus Selling.

Overview.

Comparing Long and Short Options.

Option Buying.

Option Selling.

Bullish versus Bearish.

Learn How to Roll.

Final Thoughts.

Chapter 6 Understanding Spread Terminology.

What is a Spread?

Spread Buying versus Selling.

Spread Strategy Summary.

Final Thoughts.

PART TWO The Four Basic Option Strategies.

Chapter 7 Long Calls.

Overview.

Strategy Example.

Beyond the Basics.

Final Thoughts.

Chapter 8 Long Put.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 9 Short Calls.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 10 Short Put.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

PART THREE Spread Strategies.

Chapter 11 Vertical Spread.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 12 Iron Condor.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 13 Unbalanced Spreads.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 14 Straddle and Strangle.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 15 Butterfly Spread.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 16 Condor Spread.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 17 Calendar Spread.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 18 Diagonal Spread.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 19 Covered Call.

Overview.

Strategy Example.

Beyond the Basics.

Final Thoughts.

Chapter 20 Combination.

Overview.

Strategy Examples.

Beyond the Basics.

Final Thoughts.

Chapter 21 Collar.

Overview.

Strategy Example.

Beyond the Basics.

Final Thoughts.

Chapter 22 Covered Combination.

Overview.

Strategy Example.

Beyond the Basics.

Final Thoughts.

PART FOUR Comparing Underlying Instruments.

Chapter 23 Comparing Stocks, ETFs, Indexes and Stock Index Futures.

Overview.

Size of Instrument.

Exercise and Assignment.

Margin.

Commission and Bid/Ask.

Taxes.

Final Thoughts.

Chapter 24 ETF Options.

Overview.

What is an ETF?

ETF Options.

Final Thoughts.

Chapter 25 Stock Index Options.

Overview.

What is a Stock Index?

Index Options.

Index Volatility Skew.

Index Time Decay.

Final Thoughts.

Chapter 26 Stock Index Futures Options.

Overview.

What is a Futures Contract?

Stock Index Futures Option.

Bonus Section.

Final Thoughts.

PART FIVE Advanced Topics.

Chapter 27 Assessing Volatility.

Overview.

Comparison of Implied Volatilities.

How to Compare Volatility.

Response to Changing Conditions.

Market Volatility Gauges.

Volatility Skew.

Delta-Neutral Volatility Trading.

Consider Trading Volatility Index Options.

Final Thoughts.

Chapter 28 Exercise and Assignment.

Overview.

American-Style Exercise.

European-Style Exercise.

Cash Settlement.

Automatic Exercise.

Spread Risks.

Likelihood of Exercise.

Assignment Risk.

Exercise and Assignment Procedures.

Final Thoughts.

Chapter 29 Risk Management.

Run It Like a Business.

Controlling Risk.

Final Thoughts.

Chapter 30 Margin.

Overview.

Stock, ETF, Index, and Futures Margin.

Comparing Margin.

Margin Planning.

Interest.

Cash Accounts and IRAs.

Final Thoughts.

Chapter 31 Placing an Order.

Overview.

Types of Option Order.

Strategy: The Multistep Order.

Bid/Ask Spread.

Commissions.

Trading Platform.

Clearing of Trades.

Final Thoughts.

Chapter 32 Taxation of Options.

General Rules.

Operation Taxation.

Tax Reduction for Broad-Based Index and Futures Options.

Internal Revenue Service Circular 230 Notice.

Final Thoughts.

APPENDIX A Strategies at a Glance—ETFs.

Bullish ETF Strategies.

Bearish ETF Strategies.

Trading outside a Range.

Trading inside a Range.

APPENDIX B Strategies at a Glance—Indexes.

Bullish Index Strategies.

Bearish Index Strategies.

Trading outside a Range.

Trading inside a Range.

APPENDIX C Strategies at a Glance—Stock Index Futures.

Bullish Stock Index Futures Strategies.

Bearish Stock Index Futures Strategies.

Trading outside a Range.

Trading inside a Range.

Glossary.

About the Author.

Index.