Volatile Markets Made Easy : Trading Stocks and Options for Increased Profits

by Cohen, Guy

• ISBN13: 9780135138410
• ISBN10: 0135138418
• Edition: 1st
• Format: Hardcover
• Copyright: 2009-05-19
• Publisher: FT Press

Summary

Today's markets are more volatile than ever. But smart investors know that volatile markets offer extraordinary opportunities. In this work, Cohen teaches how to take advantage of those opportunities and introduces six proven strategies designed to leverage the consistent patterns and fast-changing behavior of volatile markets.

Author Biography

Guy Cohen is the creator of Flag-Trader, OptionEasy, and Illuminati-Trader. Guy is also the author of Options Made Easy, The Bible of Options Strategies, and has extensive experience in the options and stock markets. Specializing in trading applications, Guy has developed comprehensive trading and training models, all expressly designed for maximum user-friendliness. An entertaining speaker, Guy has an MBA (Finance) from City University Cass Business School, London. For more information, go to www.flag-trader.com.

Table of Contents

Foreword . . . xiii

Acknowledgments . . . xiv

About the Author . . . xv

Preface . . . xvii

chapter 1 Introduction to Options . . . 1

chapter 2 Trends and Flags . . . 27

chapter 3 Options and the Greeks . . . 57

chapter 4 Straddles and Strangles . . . 93

chapter 5 Ratio Backspreads . . . 135

chapter 6 Diagonal Spreads . . . 175

chapter 7 The Practical Way to Trade Volatility . . . 229

chapter 8 The Science of Volatility . . . 243

chapter 9 Trading Plans and Putting It All Together . . . 267

appendix I Strategy Table . . . 297

appendix II Glossary . . . 309

Index . . . 323

 

Excerpts

Preface PrefaceIn June 2008 the S&P 500 fell by 125 points, and the Dow Jones 30 Index fell by 1350 points. Several of my students more than doubled their money during that same time. They did it by using the techniques and strategies contained in this book.This book is about making money. That's my job here, to help you make money by trading the financial markets.This is a down-to-earth book aimed at helping anyone who doesn't have the advantage of trading within the bid-ask spread, who typically places trades via an online or full-service broker or in some countries via a spread betting firm. This book is for all private investors. There are wonderful texts for mathematiciansI've read a good number of thembut this book does not aspire to be one of them. My goal is to provide you with a sense of how to trade profitably from the principles I outline.There's a big secret that I'm going to share with you. You can make money trading the markets, and you can do it by using these methods. But until you wholeheartedly embrace the concept of wealth psychology , you won't have cracked it to your fullest potential. What's more, until you have adopted the right mindset, not just for trading but for creating wealth as a whole, there exists the potential for a "retracement" for want of a better expression. How many times have you heard of people making fabulous fortunes only to blow it a few months or years later? Lots! And you may personally know a few like that too. I know I do.As the title suggests, this book focuses on how to make money from strategies that take advantage of volatility in the markets. I should distill this further by saying that we're talking here about profiting primarily from increasing volatility. The strategies contained here will all put you in a "long" position whereby your risk will always be limited and definable. In other words, the strategies in this book will make you net buyers of options. As such, your upside will typically be unlimited. I'm not going to be addressing short options strategies here.There are several worthy short strategies that can work over and over again month after month. However, short strategies can put you in an unlimited loss position and typically have limited upsides. I'm aware of many people who made their living by selling short options during the late 1990's tech bubble and who indeed made fortunes from doing so. But when the market turned, so did their fortunes and in many cases their livelihoods, their homes, their children's education...you get the picture.The point is, there's plenty of profit to be gleaned with long strategies with unlimited upside and limited downside, so we'll focus on those and make sure we do them right.For now, here's a summary of what you're about to learn in this book.Chapter 1 is an introduction to options. If you're already familiar with this topic, you should still go through it as a review before reading the other options chapters in the book.In Chapter 2 I explain my preferred technical chart patterns and why I like to trade them from a practical viewpoint. This chapter is focused on my favorite patterns and is not intended to be an almanac on all the chart patterns known to man. The aim is to be crystal clear as to what you should be looking for and why that's such a valuable approach to take.We return back to options in Chapter 3 where I summarize the Greeks.