Options for Volatile Markets: Managing Volatility and Protecting Against Catastrophic Risk, 2nd EditionISBN: 978-1-118-02226-9
Hardcover
224 pages
August 2011
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INTRODUCTION
The “New Normal” in Equity Investing 1
CHAPTER 1
Option Basics 7
What Are Options? 7
Exercise and Assignment 14
Positions 17
How Options Are Traded 19
Options in Your Account 22
CHAPTER 2
Option Pricing and Valuation 25
Option Premium 25
Theoretical Value 27
Time Value 28
Volatility 31
Interest Rates 32
Dividends 32
Calls versus Puts 33
Option Skews and Anomalies 34
CHAPTER 3
The Basics of Covered Call Writing 37
Requirements for “Valid” Covered Writes 38
Risk/Reward of a Covered Write 39
Calculating Potential Returns 46
Major Factors Affecting Call-Writing Returns 48
Covered Writing as an Ongoing Strategy 54
Summing Up Covered Writing 57
CHAPTER 4
Implementing Covered Call Writing 59
Follow-Up Actions 59
Behavioral Issues 69
Differing Approaches 70
Selecting Calls to Write 77
Risks 80
Basic Tax Rules for Options 81
Summing Up Implementation 84
CHAPTER 5
Advanced Call-Writing Techniques 87
Writing Calls on “Hot” Stocks 88
Tax Deferral Strategies 89
Covered Writing on Margin 90
Covered Writing against Securities Other Than Stock 93
Partial Writing, Mixed Writing, and Ratio Writing 98
Put Writing 103
Expiration Games 106
Option-Stock Arbitrage 108
CHAPTER 6
Basic Put Hedging 111
Put Hedge Basics 111
Advantages 115
Disadvantages 116
Behavioral Implications 123
Put Hedge versus Covered Call 127
Hedging against Catastrophic Risk 129
CHAPTER 7
Advanced Hedging Strategies 131
Put Hedge Follow-Ups 131
Using Put Spreads to Hedge 137
Collars 145
Conclusions on Protective Option Strategies 151
CHAPTER 8
Options on ETFs 153
ETFs in a Nutshell 154
ETF Options 158
Covered Call Writing on ETFs 159
Our Put Hedge and Collar Study on SPY 162
Appendix: Partial List of ETFs with Listed Options 165
CHAPTER 9
Volatility and Volatility Derivatives 171
What Is Volatility? 171
Using VIX as a Market Indicator 173
Volatility Futures 179
Variance Futures 181
The Behavior of VIX Futures 183
VIX Options 191
VIX Option Strategies 199
The Future 204
Acknowledgments 205
About the Authors 206
Index 207
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Options for Volatile Markets: Managing Volatility and Protecting Against Catastrophic Risk, 2nd Edition (US $60.00)
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