The Complete Book of Option Spreads and Combinations: Strategies for Income Generation, Directional Moves, and Risk Reduction, + Website
The Complete Book of Option Spreads and Combinations is the definitive educational resource and reference guide for using option spreads and other common sense option strategies. This useful guide shows readers how to select the right strategy for their market outlook and risk/reward comfort level by describing the inner workings of each strategy and how they are affected by underlying market movements, implied volatility, and time decay. Even more importantly, readers will understand where each strategy performs well, and the market conditions where each should be avoided. Once the proper strategy is selected, readers will learn how to identify the best options to use based on "moneyness" and time to expiration. The companion website features tools including an option pricing tool and implied volatility calculator to help all traders implement these concepts effectively.
There are many different types of spreads, and while less risky than other option strategies in general, they are more complex, with more variables to monitor. This guide serves as a handbook for the trader wanting to exploit options to the greatest possible benefit.
- Generate monthly income by selling covered strangles
- Use call spreads to recover from a losing stock position
- Protect an existing stock position using put diagonals
- Discover the best strategies for directional market plays
Option spreads are a great tool for traders who would rather be an option seller but who need to limit their risk. The Complete Book of Option Spreads and Combinations identifies those strategies that benefit from option erosion but that limit risk.
If managed properly, spreads can provide both novice and experienced investors with the potential for a large return while limiting risk. Electronic trading platforms and reduced brokerage commissions have increased option spread trading, which should occupy a spot in every savvy investor's toolkit. Comprehensive and authoritative, The Complete Book of Option Spreads and Combinations provides a valuable manual and lasting reference.
Chapter 1 Not Just More or Less but Different 1
Chapter 2 Just a Little Math 15
Chapter 3 Vertical Spreads 29
Chapter 4 Covered Calls 55
Chapter 5 Covered Puts 75
Chapter 6 Calendar Spreads 93
Chapter 7 Straddles 109
Chapter 8 Strangles 125
Chapter 9 Collars 139
Chapter 10 Risk Reversal 155
Chapter 11 Butterflies 169
Chapter 12 Condors and Iron Condors 191
Chapter 13 Conversion/Reversal 209
Chapter 14 Ratio Spreads and Back Spreads 217
Chapter 15 Other Spreads and Combinations 235
About the Website 247
About the Author 248
SCOTT NATIONS is president and chief investment officer of NationsShares, a division of Fortress Trading Inc. Previously, Nations was head trader for Sovereign Capital and a floor trader at both the Chicago Board of Trade and the Chicago Mercantile Exchange. He appears regularly on CNBC.