Option Spread Trading A Comprehensive Guide to Strategies and Tactics

by Rhoads, Russell

• ISBN13: 9780470618981
• ISBN10: 0470618981
• Edition: 1st
• Format: Hardcover
• Copyright: 2011-01-11
• Publisher: Wiley

Summary

A practical guide to unlocking the power of option spreadsWhen 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 presentedOption 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.

Author Biography

Russell Rhoads-an instructor for the Options Institute at the CBOE-Option Spread Trading contains practical guidance that will allow you to successfully incorporate this proven approach into your everyday trading endeavors.

Table of Contents

Preface

Acknowledgments

Essential Option Knowledge

The Option Basics

In-At-Out of the Money

Intrinsic and Time Value

Spread Basics

The Greeks

Payoff Tables and Diagrams

Option Pricing Calculators

Spreads Using an Underlying Security

Covered Call

Covered Call Using LEAPS^®.

Systematic Covered Call Strategies

Cash Secured Put

Systematic Cash Secured Put

Protective Put

The Collar

Synthetic Positions

Put-Call Parity

Synthetic Long Positions

Synthetic Short Positions

Arbitrage in Put-Call Parity

Individuals Using Put-Call Parity

The Greeks

Price Related Greeks

Time Related Greek

Volatility Related Greek

Interest Rate Related Greek

Conclusion

Straddles

Long Straddle Mechanics

Short Straddle

Strangles

Long Strangle Mechanics

Short Strangle Mechanics

Bull Spreads

Bull Put Spread

Bull Call Spread

Bear Spreads

Bear Call Spread

Bear Put Spread

Butterfly Spreads

Introduction to Butterfly Spreads

Long Call Butterfly

Long Put Butterfly

Iron Butterfly

Short Straddle Comparison

Short Call Butterfly

Short Put Butterfly

Reverse Iron Butterfly

Reverse Iron Butterfly vs. Straddle

Condor Spreads

Introduction to Condor Spreads

Long Call Condor

Long Put Condor

Iron Condor

Iron Condor vs. Short Strangle

Short Condor Spreads

Reverse Iron Condor

Reverse Iron Condor vs. Long Strangle

Ratio Spreads

Call Ratio Spread

Put Ratio Spread

Ratio Spread Comparisons

Backspreads

Call Backspread

Put Backspread

Backspread Comparisons

The Stock Repair Strategy

Doubling Down on a Position

The Stock Repair Trade

Calendar Spreads

Time Value Effect

Long Call Calendar

Long Put Calendar

Combined Calendar Spread

Diagonal Spreads

Call Diagonal Spread

LEAPS Call Diagonal Spread

Put Diagonal Spread

LEAPS Put Diagonal Spread

Double Diagonal Spread

Delta Neutral Trading

Delta Review

Delta Neutral Positions

Gamma

Market Maker Trading

Executing a Spread Trade

Single Stock/Option Trade

Executing a Stock or Option Trade

A Single Option Spread

A Spread with Two Options

A Spread with Multiple Legs

Legging into a Spread Trade

About the Author

Index

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