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The Complete Book of Option Spreads and Combinations: Strategies for Income Generation, Directional Moves, and Risk Reduction, + Website

ISBN: 978-1-118-80545-9
264 pages
October 2014
The Complete Book of Option Spreads and Combinations: Strategies for Income Generation, Directional Moves, and Risk Reduction, + Website (1118805453) cover image

Description

Get a handle on option spreads to hike profit and squash loss

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.

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Table of Contents

Foreword vii

Preface ix

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

Index 249

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Author Information

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.

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