The Complete Options Trader A Strategic Reference for Derivatives Pr
Options traders rely on a vast array of information concerning probability, risk, strategy components, calculations, and trading rules. Traders at all levels, as well as portfolio managers, must refer to numerous print and online sources, each source only
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THE COMPLETE
OPTIONS O ONS TRADER A Strategic Reference for Derivatives Profits
The Complete Options Trader
Michael C. Thomsett
The Complete Options Trader A Strategic Reference for Derivatives Profits
Michael C. Thomsett https://thomsettsguide.com/ Spring Hill, TN, USA
ISBN 978-3-319-76504-4 ISBN 978-3-319-76505-1 (eBook) https://doi.org/10.1007/978-3-319-76505-1 Library of Congress Control Number: 2018937673 © The Editor(s) (if applicable) and The Author(s) 2018 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover image © iStock / Getty Images Plus Cover design by Tjaša Krivec Printed on acid-free paper This Palgrave Macmillan imprint is published by the registered company Springer International Publishing AG part of Springer Nature. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Contents
I ntroduction 1 Market Overview 5 Market Risks 25 Option Strategies 55 Option Glossary 137 Elements of Value 199 Return Calculations 213 Options and Stock Selection 227 Option Taxation 237 Index 243
v
List of Figures
Market Overview Fig. 1 Total options contract volume, 1973–2015 Fig. 2 Option contract volume by exchange, 2015 Fig. 3 Visualizing historical volatility Fig. 4 Moneyness of the option
9 9 18 19
Market Risks Fig. 1 Consumer Price Index (CPI), 1987–2017 Fig. 2 Equifax stock chart Fig. 3 Monsanto stock chart
37 48 50
Option Strategies Fig. 1 Bear call spread Fig. 2 Bear put ladder Fig. 3 Bear put spread Fig. 4 Box spread (debit) Fig. 5 Box spread (credit) Fig. 6 Bull call ladder Fig. 7 Bull call spread Fig. 8 Bull put ladder Fig. 9 Bull put spread Fig. 10 Butterfly spread Fig. 11 Calendar spread Fig. 12 Collar Fig. 13 Condor Fig. 14 Conversion Fig. 15 Covered call Fig. 16 Covered strangle Fig. 17 Types of spreads
57 58 59 61 62 64 65 66
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