Options for Volatile Markets Managing Volatility and Protecting Against Catastrophic Risk

by Lehman, Richard; McMillan, Lawrence G.

• ISBN13: 9781118022269
• ISBN10: 1118022262
• Edition: 2nd
• Format: Hardcover
• Copyright: 2011-08-09
• Publisher: Bloomberg Press

Summary

A valuable tool for any health care leader dedicated to improving the quality of care and enhancing patient satisfaction. Combining theory and discussion with a practical 'action plan' format, Sherman challenges the reader to think about solutions, not just ideas. --Irwin Press, president, Press, Ganey Associates, Inc. Whether you're a CEO, a caregiver, or simply someone who cares about the results of service initiatives, you'll find plenty of great ideas in this book. --Mark C. Clement, president and CEO, Holy Cross Hospital, Winner, 1994 AHA Great Comebacks Award, 1996 International Enterprise Award for Customer Satisfaction, 1998 Global Best Practices Award for Customer Service Total Customer Satisfaction reports on the breakthrough methods used by awarding winning hospitals and health care organizations to achieve top-rated national status in customer satisfaction. Learn from top experts in the field of how to create and implement total customer satisfaction tactical plan that will boost customer satisfaction ratings in your health care organization.

Author Biography

RICHARD LEHMAN is the founderof RHL Capital, a registered investment advisor, and a part-time instructor of behavioral finance and options at UC Berkeley Extension. He is also the author of Far From Random, and publishes an investment newsletter called the Channelist. Lehman's financial career spans more than thirty years in product management, marketing, sales, and investment management beginning with an eleven-year stint on Wall Street with E.F. Hutton & Co., Thomson McKinnon Inc., and the New York Stock Exchange.

LAWRENCE G. McMILLAN is the founder and President of McMillan Analysis Corporation. He authors the Daily Volume Alerts, a unique daily service that selects short-term stock trades by looking for unusual increases in equity option volume. McMillan manages option-oriented accounts for individual investors and also publishes the Option Strategist, a derivative products newsletter covering equity, index, and futures options. McMillan's web site, www.optionstrategist.com, twice received a "Best of the Web" award from Forbes magazine. He is the coauthor, with Richard Lehman, of the first edition of this book and the author of McMillan on Options (Wiley) and Options as a Strategic Investment.

Table of Contents

Preface	p. xi
Introduction: The ôNew Normalö in Equity Investing	p. 1
Option Basics	p. 7
What Are Options?	p. 7
Exercise and Assignment	p. 14
Positions	p. 17
How Options Are Traded	p. 19
Options in Your Account	p. 22
Option Pricing and Valuation	p. 25
Option Premium	p. 25
Theoretical Value	p. 27
Time Value	p. 28
Volatility	p. 31
Interest Rates	p. 32
Dividends	p. 32
Calls versus Puts	p. 33
Option Skews and Anomalies	p. 34
The Basics of Covered Call Writing	p. 37
Requirements for ôValidö Covered Writes	p. 38
Risk/Reward of a Covered Write	p. 39
Calculating Potential Returns	p. 46
Major Factors Affecting Call-Writing Returns	p. 48
Covered Writing as an Ongoing Strategy	p. 54
Summing Up Covered Writing	p. 57
Implementing Covered Call Writing	p. 59
Follow-Up Actions	p. 59
Behavioral Issues	p. 69
Differing Approaches	p. 70
Selecting Calls to Write	p. 77
Risks	p. 80
Basic Tax Rules for Options	p. 81
Summing Up Implementation	p. 84
Advanced Call-Writing Techniques	p. 87
Writing Calls on ôHotö Stocks	p. 88
Tax Deferral Strategies	p. 89
Covered Writing on Margin	p. 90
Covered Writing against Securities Other Than Stock	p. 93
Partial Writing, Mixed Writing, and Ratio Writing	p. 98
Put Writing	p. 103
Expiration Games	p. 106
Option-Stock Arbitrage	p. 108
Basic Put Hedging	p. 111
Put Hedge Basics	p. 111
Advantages	p. 115
Disadvantages	p. 116
Behavioral Implications	p. 123
Put Hedge versus Covered Call	p. 127
Hedging against Catastrophic Risk	p. 129
Advanced Hedging Strategies	p. 131
Put Hedge Follow-Ups	p. 131
Using Put Spreads to Hedge	p. 137
Collars	p. 145
Conclusions on Protective Option Strategies	p. 151
Options on ETFs	p. 153
ETFs in a Nutshell	p. 154
ETF Options	p. 158
Covered Call Writing on ETFs	p. 159
Our Put Hedge and Collar Study on SPY	p. 162
Appendix: Partial List of ETFs with Listed Options	p. 165
Volatility and Volatility Derivatives	p. 171
What Is Volatility?	p. 171
Using VIX as a Market Indicator	p. 173
Volatility Futures	p. 179
Variance Futures	p. 181
The Behavior of VIX Futures	p. 183
VIX Options	p. 191
VIX Option Strategies	p. 199
The Future	p. 204
Acknowledgments	p. 205
About the Authors	p. 206
Index	p. 207
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