Spread Trading An Introduction to Trading Options in Nine Simple Steps

by Jensen, Greg

• ISBN13: 9780470443682
• ISBN10: 0470443685
• Edition: 1st
• Format: Hardcover
• Copyright: 2009-05-26
• Publisher: Wiley

Summary

Though there are many variations and nuances, the basic concept of options trading is simple: An investor can purchase an option to buy stock without actually buying the stock itself. Then, as the value of the stock rises, the value of the option rises also. The investor can then sell that option to someone else for a profit-without ever having owned the underlying stock. This book provides readers with the basic tools to begin trading options through the best and safest method available: spread trading. Spread trading is the practice of combining options trades and adjusting them over time. In addition, while most discussions about options trading do not emphasize how both parties in an options trade can come out ahead. "Spread Trading" undercuts this assumption and explains how to profit on either side of a deal.

Author Biography

Greg Jensen is cofounder of Spread Trade Systems, an industry leader in investment education, with students from all corners of the world. Specializing in the techniques of option trading, Spread Trade Systems has developed cutting-edge, innovative educational tools such as weekly Adjust Trade Chat Sessions with STS advisors and MarketWatch Newsletters. A Registered Investment Advisor, Jensen earned his degree in business management, with an emphasis in finance, from Utah State University.

Table of Contents

Acknowledgments	p. ix
About the Author	p. x
Introduction	p. 1
Understanding the Long and Short of "Call" Options in the Market
Lon and Shorty	p. 11
Let's Make a Deal	p. 15
Trading Rights and Obligations	p. 19
Some Key Terms ... that Almost Make Sense!	p. 21
Strike One...	p. 25
Strike Two...	p. 29
Time Travel	p. 35
R&R and Time Travel for Lon	p. 37
R&R and Time Travel for Shorty	p. 43
How Lon and Shorty Came Out on Their Deal	p. 49
Understanding the Long and Short of "Put" Options in the Market
Bulls, Bears, and Stags	p. 53
The Put: Reaching a Different Trade of Rights and Obligations	p. 57
Strike One...	p. 61
Strike Two and Time Travel	p. 67
R&R for Lon	p. 69
R&R for Shorty	p. 75
The Big Picture ... So Far	p. 79
How Lon and Shorty Came Out on Their Deal	p. 83
Ramping Up the Possibilities
Did You Know that There Are a Lot of People Trading Options?	p. 87
Did You Know You Can Actually Buy and Sell Your Options to Other People?	p. 97
Did You Know You Can Vastly Increase Your Return on Investment?	p. 109
Did You Know that You Never Want to "Make As Much Money As Possible"?	p. 115
Best of All: Did You Know You Can Combine Option Instruments?	p. 119
Getting a Few Basics in Place
More Time Travel	p. 131
What Is an Option Worth?	p. 135
Strike Three	p. 143
Choosing Stocks	p. 147
Reading the Tea Leaves (1)	p. 155
Reading the Tea Leaves (2): Stock Trends	p. 165
Getting the Final Pieces in Place	p. 183
Fun, Fun, Fun!	p. 197
Understanding Two Basic Option Trades
Insuring Your Investment	p. 209
Shorty Heaven: Selling Your Way to Profits	p. 221
Moving from Option Trading to Spread Trading
Trading in Surround Sound: The Fundamental Spread Trade	p. 231
The Two Basic Ways to Make Money in Spread Trading	p. 245
Understanding Bullish Spread Trades
The Bull Call	p. 253
The Bull Put	p. 265
Bull vs. Bull	p. 273
Understanding Bearish Spread Trades
The Bear Call	p. 279
The Bear Put	p. 287
Bear vs. Bear	p. 295
Getting Started
Lifting the Fog	p. 303
The Launch	p. 311
Appendix Answers to End-of-Chapter Reviews	p. 319
Index	p. 335
Table of Contents provided by Ingram. All Rights Reserved.