Options Trading QuickStart Guide

Clydebank Finance

Description

Options Trading, Made Simple



This is not your typical options trading book, plagued with jargon and written by Wall Street academics who are more concerned with showing off than with actually teaching you how to trade. In Options Trading For Beginners, ClydeBank Finance packages the wisdom of the Wall Street elite into a straight-forward and easy-to-read teaching tool. Options Trading For Beginners is ClydeBank Finance at its best, making complex ideas clear while endowing readers with a wealth of powerful new knowledge.



Whether you’re a newcomer to options trading or a grizzled veteran looking for a fresh take on basic strategy, you’ll enjoy the plain-spoken style and colorful scenarios illustrated in Options Trading for Beginners.



In addition to providing a solid beginner’s course in options trading, Options Trading for Beginners walks you through a multitude of strategic trading decisions, showing you how a trader thinks and how he arrives at critical decisions. This book wasn’t written for someone who wants to stay on the sidelines, but for the ambitious trader looking to become a formidable, sharp, and cunning options trader.



You’ll Learn:

- The fundamentals of put and call options

- How to understand and leverage intrinsic value

- How to use a stock’s IV (implied volatility) to inform smart trades

- What you need to know about “The Greeks'"

- The mechanics of the short sell

Informations

• Publié par: ClydeBank Media LLC
• Date de parution: 01 juin 2016
• Nombre de lectures: 13
• EAN13: 9781945051517
• Langue: English
• Poids de l'ouvrage: 4 Mo

Extrait

Visit: www.clydebankmedia.com/investing-campus
Copyright © 2016 by ClydeBank Media - All Rights Reserved.
This document is geared towards providing exact and reliable information in regards to the topic and issue covered. The publication is sold with the idea that the publisher is not required to render accounting, officially permitted, or otherwise, qualified services. If advice is necessary, legal or professional, a practiced individual in the profession should be ordered.
From a Declaration of Principles which was accepted and approved equally by a Committee of the American Bar Association and a Committee of Publishers and Associations. In no way is it legal to reproduce, duplicate, or transmit any part of this document in either electronic means or in printed format. Recording of this publication is strictly prohibited and any storage of this document is not allowed unless with written permission from the publisher.
The information provided herein is stated to be truthful and consistent, in that any liability, in terms of inattention or otherwise, by any usage or abuse of any policies, processes, or directions contained within is the solitary and utter responsibility of the recipient reader. Under no circumstances will any legal responsibility or blame be held against the publisher for any reparation, damages, or monetary loss due to the information herein, either directly or indirectly. Respective authors own all copyrights not held by the publisher. The information herein is offered for informational purposes solely, and is universal as so. The presentation of the information is without contract or any type of guarantee assurance.
Trademarks : All trademarks are the property of their respective owners. The trademarks that are used are without any consent, and the publication of the trademark is without permission or backing by the trademark owner. All trademarks and brands within this book are for clarifying purposes only and are owned by the owners themselves, not affiliated with this document.
ClydeBank Media LLC is not associated with any organization, product or service discussed in this book. The publisher has made every effort to ensure that the information presented in this book was accurate at time of publication. All precautions have been taken in the preparation of this book. The publisher, author, editor and designer assume no responsibility for any loss, damage, or disruption caused by errors or omissions from this book, whether such errors or omissions result from negligence, accident, or any other cause.
Edition # 2 – Created : July 19, 2018
Editors : Marilyn Burkley and Patricia Guth
Cover Illustration and Design: Katie Poorman, Copyright © 2016 by ClydeBank Media LLC
Interior Design: Katie Poorman, Copyright © 2016 by ClydeBank Media LLC
eBook Design: Luca Funari, Copyright © 2016 by ClydeBank Media LLC
ClydeBank Media LLC
P.O Box 6561
Albany, NY 12206
Printed in the United States of America
Copyright © 2016
ClydeBank Media LLC
www.clydebankmedia.com
All Rights Reserved.
ISBN-13 : 978-1-945051-05-0


contents
INTRODUCTION
Why This Book Was Written
| 1 | OPTION BASICS
What are Options?
What are Stocks?
Options in the Stock Market
The Broker
The Market Maker
The Options Clearing Corporation
Options Industry Council
Why Were Options Such a Hit?
Options vs. Stocks
| 2 | TRADING FUNDAMENTALS
Calls and Puts—What’s in a Name?
Buying a Call Option on Exxon
Selling a Call Option on Disney ™
Buying a Put Option on General Electric ™
Selling a Put Option on McDonalds ™
| 3 | A SOUND STRATEGY FOR A BEGINNER
Selling the Covered Call
Dumping MGM
In the Money (ITM) or Out of the Money (OTM)
Disclaimer
Avoid these Beginner Mistakes
Practice Makes Perfect
| 4 | KEY INFLUENCERS ON OPTIONS PRICES
Why You Should Care About How Options Are Priced
The Moneyness Factor
Time Value & Time Decay
Volatility
Interest Rates & Dividends
| 5 | WIN AT OPTIONS BY SPEAKING GREEK
Delta
Gamma
Theta
Vega
Rho
| 6 | POPULAR OPTIONS STRATEGIES
Straddling a Stock Using Options
The Strangle
A Bull (or Bear) Spread
Rolling Positions
CONCLUSION
GLOSSARY
ABOUT CLYDEBANK
BEFORE YOU START READING, DOWNLOAD YOUR FREE DIGITAL ASSETS!
Visit the URL below to access your free Digital Asset files that are included with the purchase of this book.
DOWNLOAD YOURS HERE:
www.clydebankmedia.com/options-assets


introduction

Why This Book Was Written
Hunting for a good beginner-level book on options trading can be a very frustrating endeavor. Many of the books that are labeled “introduction to...” or “...for beginners” are written by high-level brokers or academics who have an annoying habit of talking over their readers’ heads and diving headfirst into Wall Street jargon without taking the time to properly explain the basics.
On the flip side, since options trading is such a fertile niche for new ideas, every John Doe and his brother has written a book on options trading, and, unfortunately, an enthusiastic options trader doesn’t necessarily make a good writer. Advice from these writers can be not only confusing but also misleading and the results of following said advice can be alarming if not disastrous.
This book, however, was written with the goal of maximizing clarity and readability, all while providing an extensive look at the fundamentals of options trading. You should be more than ready to make your first few trades after reading this book.


| 1 |
Option Basics
Throughout this book, we’ll be talking about stock options . However, there are other types of options which you may delve into at a later time. Here’s a definition of each from the folks at optionstrading.org .
Stock Options : The underlying asset for these contracts is shares in a specific publicly listed company.
Index Options : These are very similar to stock options, but rather than the underlying security being stocks in a specific company it is an index – such as the S&P 500.
Forex/Currency Options : Contracts of this type grant the owner the right to buy or sell a specific currency at an agreed rate.
Futures Options : The underlying security for this type is a specified futures contract. A futures option essentially gives the owner the right to enter into that specified futures contract.
Commodity Options : The underlying asset for a contract of this type can be either a physical commodity or a commodity futures contract.
Basket Options : A basket contract is based on the underlying asset of a group of securities which could be made up of stocks, currencies, commodities or other financial instruments.
But let’s keep it simple for now. Consider this scenario as a way to understand the basic premise of stock options trading.
I know a fashion designer who is an eccentric genius. She makes incredible dresses that you just can’t find anywhere else. There’s nothing like them! She makes them all by hand, and she does all the work herself. The only drawback is that she only makes these dresses in the summer, and she only makes about 10 of them each year.
It’s the middle of winter, and I’ve made a deal to buy one of this designer’s summer dresses for a price of $100. I’ve guaranteed the purchase using a contract. The contract states that I have the right to purchase a dress at $100 at any time before the third Friday of September. To secure my option to buy the dress, I paid a fee, or premium , of $50.
Note: This $50 is not a deposit or down payment. It will not be deducted from the $100 I will eventually pay to own a dress. The $50 premium is merely the price of my right to buy the dress for $100 before the third Friday in September.
In July, I decide to exercise my option to buy a dress. Per my contract, I pay $100 for the dress. On the same day I decide to go to the designer’s Etsy page and take a look at the other dresses she’s selling. They are all priced at $200. I decide, rather than keeping the dress, to sell it to another party for $200. Since I paid only $100 plus the premium payment of $50, I profited $50 from my purchase of an option.


What are Options?
Options are contracts. They entitle a party to purchase or sell a specific asset (stock, real estate, merchandise) for a specific price within a certain window of time. They also oblige a separate party to sell or purchase the specific asset. For instance, in the example above, just as my option contract guaranteed me the right to buy the dress for $100, the dress maker was obliged to sell the dress for $100. In every option contract there is a buyer and a seller. One party, either the buyer or the seller , has an obligation to participate in a particular transaction per the dictates of the options contract. The other party, either the buyer or the seller , has the option to participate in a particular transaction per the dictates of the options contract. In the example above, I paid $50 for the option to buy a dress for $100 before the third Friday in September. Just because I owned this option does not mean that I was obliged to execute it. I was the owner or buyer of the option. The dressmaker, who was obligated to sell me the dress, was the writer or seller of the option.