No-Hype Options Trading : Myths, Realities, and Strategies That Really Work

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 2011-01-11
  • Publisher: Wiley
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A straightforward guide to successfully trading optionsOptions provide traders and investors with a wide range of strategies to lock in profits, reduce risk, generate income, or speculate on market direction. However, they are complex instruments and can be difficult to master if misunderstood.No-Hype Options Trading offers the straight truth on how to trade the options market. In it, author Kerry Given provides realistic strategies to consistently generate income every month, while debunking many myths about options trading that tend to lead retail traders astray. Along the way, he makes a conscious effort to avoid complex strategies that are appropriate only for market makers or professional traders, and instead focuses on low-risk strategies that can be easily implemented and managed by a part-time trader. Shows how you can use option spreads in conjunction with stocks to produce a regular stream of income Each chapter includes exercises to help you master the material presented Examines how you can adjust option positions as market conditions change in order to maintain an optimal risk/reward profileWritten for anyone interested in successfully trading options, this reliable resource cuts through the hype and misinformation that surrounds options trading and presents a realistic path to profits.

Author Biography

KERRY W.GIVEN, PhD, is founder of Parkwood Capital, LLC, a business that consists of stock and options coaching, a monthly newsletter, a small hedge fund, and a trading advisory service. He writes a monthly column, "Ask Dr. Duke," for, and conducts monthly webinars with, SFO magazine. Given speaks frequently at trading conferences and on behalf of various option brokerage firms. He is the only options coach and educator who publishes his trading results live as they occur. Given earned his BS from the University of Florida and his PhD from the University of Minnesota.

Table of Contents

Acknowledgmentsp. xi
Introductionp. xiii
The Foundations of Options Tradingp. 1
Option Basicsp. 3
Definitions of Calls and Putsp. 3
Are You Long or Short?p. 4
Option Contract Sizep. 4
Is My Option In- or Out-of-the-Money?p. 5
Option Trade Ordersp. 5
Option Expirationp. 6
LEAPS Optionsp. 7
Option Settlementp. 7
Options Cyclesp. 8
Probability Distributionsp. 11
The Gaussian Distributionp. 11
Application to the Real Worldp. 12
Risk-Adjusted Returnsp. 15
High-Probability Tradingp. 17
Low-Probability Tradingp. 18
Options Trading Mythsp. 20
What Is a Conservative Trade?p. 21
Exercisesp. 22
Options Pricing and Implied Volatilityp. 25
The Black Scholes Pricing Modelp. 25
The Greeksp. 26
Implied Volatilityp. 27
Building the Price of an Optionp. 28
A Closer Look at the Greeksp. 29
How Will We Use the Greeks?p. 31
Exercisesp. 32
Vertical Spreadsp. 33
Building the Vertical Spreadp. 33
Effects of Implied Volatilityp. 35
Early Exercisep. 41
Expiration and Exercisep. 43
Margin Requirementsp. 44
Application of Probability Calculationsp. 45
Risk/Reward and Probability of Successp. 46
Exercisesp. 47
Options Strategies for Income Generationp. 49
Using Options to Boost Income in a Stock Portfoliop. 51
The Classic Covered Call Strategyp. 52
Strategic Considerationsp. 53
The Notorious Selling Naked Puts Strategyp. 53
Selling Naked Puts for Incomep. 54
Buying Stocks at a Discountp. 56
Combining the Covered Call with Selling Naked Putsp. 56
Early Exercisep. 58
Risk Managementp. 60
The Achilles' Heel of Directional Strategiesp. 61
Exercisesp. 62
Calendar and Double Calendar Spreadsp. 63
Vega Risk and Calendar Spreadsp. 66
Volatility Skewsp. 67
Searching for Calendar Candidatesp. 70
Entering and Managing the Tradep. 71
Early Exercisep. 71
Adjustmentsp. 72
Out-of-the-Money Calendar Spreadsp. 73
Double Calendar Spreadsp. 73
Determining the Optimal Strike Pricesp. 76
Trade Management and Adjustmentsp. 82
Multiple Calendar Spread Positionsp. 83
Exercisesp. 83
Double Diagonal Spreadsp. 85
Diagonal Spreadsp. 85
Double Diagonal Spreadsp. 87
Managing the Tradep. 90
Double Diagonals vs. Double Calendarsp. 91
Exercisesp. 92
Butterfly Spreadsp. 95
At-the Money and Out-of-the-Money Butterfly Spreadsp. 95
Iron Butterfly Spreadsp. 99
The Broken-Wing Butterflyp. 99
Margin Requirementsp. 101
Trade Managementp. 103
Closing Butterfly Spreadsp. 106
Butterfly Spreads as Adjustmentsp. 111
Exercisesp. 112
Condor Spreadsp. 113
The Basic Condor Spreadp. 113
The Opportunistic Modelp. 116
The Insurance Modelp. 119
Iron Condor Spreadsp. 121
Vega Risk and the Condorp. 124
The Short-Term Iron Condorp. 128
The Long-Term Iron Condorp. 129
Capital Managementp. 131
Risk Managementp. 131
Adjustment Techniquesp. 132
Adjustment Pros and Consp. 134
Adjustment Case Studiesp. 135
Managing the Iron Condor with the Greeksp. 138
Advanced Adjustment Techniquesp. 140
Iron Condor Trading Systemsp. 140
Butterflies and Condors Are Cousinsp. 144
Exercisesp. 146
Delta-Neutral Trading Strategiesp. 149
Risk Management Systemsp. 151
Challenging Markets for the Delta-Neutral Traderp. 152
Two Distinct Trading Philosophiesp. 153
The "Secret" of Successp. 155
Make Your Trading a Businessp. 157
Getting Startedp. 157
Managing Lossesp. 159
The Trading Planp. 159
Money Managementp. 160
The Psychology of Tradingp. 161
Living with the Two-Headed Monsterp. 163
Required Tools for This Businessp. 164
What's Next?p. 165
Appendix: Answers to the Chapter Exercisesp. 169
Glossaryp. 185
Indexp. 193
Table of Contents provided by Ingram. All Rights Reserved.

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