From buying calls and puts to iron butterflies and condors, Guy explains these strategies in a clear and concise manner that options traders of any level can understand. His chapter on options and taxes is especially welcomed and needed. The Bible of Options Strategies is a straightforward, easy-to-use reference work that should occupy a space on any options trader's bookshelf.
Patel, Author and Financial Times Columnist. Bullet points make for a quick and enlightened read, getting to the heart of what you really need to know about each options strategy. This book is a must for any serious trader's library.
Pick the right options strategies Introducing today's first and only comprehensive reference to contemporary options trading! OptionEasy creator Guy Cohen identifies today's popular strategies No other book presents this much authoritative, current information on options trading strategies.
Covers all of today's best income, volatility, leveraged, synthetic, and sideways market strategies. Discover why each strategy works, when it's appropriate, and how to use it—step by step.
By Guy Cohen, whose OptionEasy application has helped thousands of traders achieve breakthrough results! The Bible of Options Strategies is the definitive reference to contemporary options trading: Options expert Guy Cohen systematically presents today's most effective strategies for trading options: The only reference of its kind, this book will help you identify and implement the optimal strategy for every opportunity, trading environment, and goal.
No Kindle device required. Download one of the Free Kindle apps to start reading Kindle books on your smartphone, tablet, and computer. To get the free app, enter your mobile phone number. Would you like to tell us about a lower price? If you are a seller for this product, would you like to suggest updates through seller support? PrefacePrefaceHow to Use This Book Options give investors so much flexibility that when it came to writing a book named The Bible of Options Strategies, I found myself cursing just how flexible they can be!
Sixty strategies is a lot of ground to cover, but in reviewing them all again I've done it several times already!
The benefits of options are often trotted out to new students or prospective customers as the first salvo of an up-sell campaign, but they're worth looking at again, this time from a practical point of view. One option contract represents shares of stock and is usually a fraction of the cost of what you'd pay for the equivalent number of shares. Because our cost basis is so low, the position is much more sensitive to the underlying stock's price movements, and hence our percentage returns can be so much greater.
We can use puts and calls to ensure that we can make money if the stock goes up, down, or sideways. Different options strategies protect us or enable us to benefit from factors such as time decay, volatility, lack of volatility, and more. Options enable us to substantially reduce our risk of trading, and in certain rare cases, we can even eliminate risk altogether, albeit with the trade-off of very limited profit potential!
So, with all the different benefits of options, why on earth would traders not be curious to learn more about them? Well, for a start, the initial barrier to entry is quite high, in that options are reasonably complex instruments to understand for the first time. After you're over that hurdle, though, they become more and more fascinating!
The other reason is that there is such a multitude of other investment securities for people to choose from, many will pick what seems like the simplest, rather than what may fit their investment aims the best.
Given that options can be a challenge, it's my job to make life as simple as possible for you. One of the ways in which I do this is to break things down into pictures so we can see what we're doing. As soon as we can see what we're doing, life becomes much clearer when you're creating options strategies.
Everything to do with OptionEasy and all my material is designed to be visual-friendly. This goes back to when I started to learn all about options and the fact that the penny only started to drop when I converted the concepts into pictures. All of a sudden, everything fit into place, and I started to be able to extend logic faster and further than before.
This book is designed to be a reference book, one that you can pick up any time to learn about and understand a strategy. It isn't an academic workbook. It's a practical book, written for traders, designed to work interactively with your trading activities. As the title suggests, it's a book about options strategies, of which we take on 58! That's not to say you need to learn about each and every one of them, but at least you have the choice!
In order to make life easier for you, we categorize the strategies into different descriptions for the following criteria:. Each strategy is assigned a "value" in term of its suitability for different levels of trader.
Each level is given an associated icon. The allocations are defined according to a subjective view of complexity, risk, and desirability of the strategy. Therefore, some highly risky and undesirable strategies have been put into the Expert basket in order to warn novices and intermediates away.
Also Novice strategies are not exclusive to novice traders. It's simply as question of suitability, and novice strategies are highly relevant and suitable to all levels of trader. In some cases, the strategy is not complex at all but is considered unacceptably risky for novice and intermediate traders at least without a warning.
I have tried to be objective here, but I'm mindful not just of my own experiences but also the many students who regularly show me their trading disasters! Conservative by nature, I'm a believer that loss of opportunity is preferable to loss of capital Joe DiNapoli , and perhaps some of these rankings bear testimony to this philosophy.
This is where we define whether a strategy is suitable to bullish, bearish, or direction neutral outlooks. Volatility is one of the most important factors affecting option pricing and therefore option trading. You really should familiarize yourself with the concept, which, forgive the plug, is dealt with in my first book, Options Made Easy. Here, we define whether a strategy is suitable for trades anticipating high volatility or low volatility in the markets. Some strategies, such as Straddles, require high volatility after you've placed the trade, so a Straddle would fall into the High Volatility category.
With any trade you're looking to make, you must be aware of your potential risk, reward, and breakeven point s. In such cases, or when there is no definable stop to the potential risk of a trade, you're well advised to be aware of such a position in advance! Here, we show you which strategies have capped or uncapped risk. Strategies with uncapped risk aren't necessarily all bad, but you should at least be aware of what you are getting into.
Often you can mitigate such risk with a simple stop loss provision, in which case you're not going to liable to uncapped risk. Often, such uncapped risk scenarios only occur if the stock falls to zero or rises to infinity, which mostly are rare circumstances, but you're better off being aware!
Following the risk scenarios described previously, the strategies also have potential reward scenarios, too. Just because a strategy has unlimited reward potential doesn't mean that it's necessarily a great strategy, and just because it may have capped reward doesn't mean it's necessarily a bad strategy. Strategies can be used for income purposes usually short-term or to make capital gains.
Many traders like the Covered Call because it's suitable for novices and because it's an income strategy that they can use every month. Each strategy contains different legs. Some have just one, and others have up to four. Each leg must be composed of any one of the basic four option strategies long or short call or put or a long or short stock position.
Here's how we identify them:. In terms of structure, I've tried to make this book as easily navigable as possible, and much of that is solved by matrix-style tables of contents. Each chapter contains strategies that are commensurate with a specific style of options trading.
Inevitably there's some overlap between chapters for certain strategies, which we address in the appropriate places. Chapter 1 addresses the basic strategies, including buying and selling stocks and then buying and selling calls and puts.
After you understand those cornerstones and how the pictures relate to each strategy, then you can fast-forward to any part of the book and any strategy you like. All strategy guides are modular and follow the same format, so that you can become familiar with the style and structure of the content.
Chapter 2 is all about income strategies. An income strategy is when you're effectively a net seller of short-term options, which generates monthly income. You have to be careful, though, not to expose yourself to unlimited risk scenarios, which is why we use icons to identify excess risk. In Chapter 3, we cover "vertical spreads. Obviously, there's some overlap here with other chapters, which is why the chapter is comparatively small.
Chapter 4 goes into volatility strategies and is bound to be as popular as the income strategies chapter! Here we address those strategies that benefit from increasing volatility after you've placed the trade.
In Chapter 5, we reverse this and explore those strategies that benefit from decreasing volatility after you've placed the trade. So here we're looking for stocks that we think will be rangebound for some time. Typically these are short-term strategies.
Chapter 6 identifies the ratio spreads and backspreads, where you're using increasing leverage to increase your returns. These are for advanced and experienced traders only! In Chapter 7, we look at synthetic strategies that mainly mimic other strategic goals, using a combination of stock legs, call legs, and put legs.
For example, we can replicate owning a stock purely by buying and selling calls and puts in such a way that we hardly pay any cash out.
In other words, we've simulated the risk of owning the stock, but with no cash outlay. We can also synthetically re-create straddle positions and other strategies.
Lastly, in Chapter 8, we investigate some of the taxation issues that will confront you during your trading careers. This is not a definitive tax guide but rather more a flag raiser. Each strategy is presented in a modular format. In this way, the book should be easy to navigate.More...