Your options handbook : the practical reference and strategy guide to trading options

434 Pages·2011·8.3 MB·English

by  Jared Levy

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Your Options
Handbook
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Foundedin1807,JohnWiley&Sonsistheoldestindependentpublishing
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theadviceandstrategiesneededtoprospertodayandwellintothefuture.
For a list of available titles, visit our Web site at www.WileyFinance.com.
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Your Options
Handbook
The Practical Reference and
Strategy Guide to Trading Options
JARED A. LEVY
JohnWiley&Sons,Inc.
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Copyright © 2011 by Jared A Levy. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest
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LibraryofCongressCataloging-in-PublicationData:
Levy,Jared,1976–
Youroptionshandbook:thepracticalreferenceandstrategyguidetotradingoptions/
JaredLevy.
p.cm.–(Wileytradingseries)
Includesindex.
ISBN978-0-470-60362-8(hardback);ISBN978-1-118-04118-5(ebk);
ISBN978-1-118-04119-2(ebk);ISBN978-1-118-04120-8(ebk)
1.Options(Finance)I.Title.
HG6024.A3L4852011
332.64(cid:2)53–dc22
2010049287
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Thisbookisdedicatedtothosewholosttheirlivesinthe
attacksofSeptember11,2001,andtoallthosewhohavebeen
innocentvictimsasthehumanracestrugglesforpeace.
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Contents
Foreword xi
Preface xv
Acknowledgments xxvii
CHAPTER 1 Market Basics and Market
Mechanics: What Is Going
On and How Does It All Work? 1
TheMarkets 1
SectorsandIndustries 9
ETFs—ADifferentKindofInvestment 12
FinalThoughts 16
CHAPTER 2 Data That Moves the Markets:
The First Step in Your Analysis 17
DataandSentiment 18
Economists,Predictions,andIndicators 18
EconomicIndicators 21
KeyIndicatorstoWatch 27
FinalThoughts 43
CHAPTER 3 Fundamental and Technical Stock
Analysis and Tools: The Second
Step in Your Analysis 45
IntroductiontoFundamentalAnalysis 46
DigestingtheNews 57
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viii CONTENTS
CheapversusValue 61
MergersandAcquisitionsfortheEverydayOptionsTrader 64
TheWisdom(orLackThereof)ofCrowds 65
TradingTacticsandTechnicalAnalysis 67
PlansofAttack 93
NewTraderTips 101
Top10ThingsProfessionalsDoThattheAverageRetail
TraderDoesn’t 104
FinalThoughts 106
CHAPTER 4 Options Basics: Techniques and
Fundamentals to Master Before
Applying Any Options Strategy 107
TheOracleofOmahaDidIt,WhyCan’tI? 111
TheBasics 114
TradingOptions—OrderTypes 122
OptionsExpirationinDetail 126
ExerciseandAssignment 128
WhenShouldYouExerciseanOptionEarly? 132
WhatIsTripleWitching?(OrQuadrupleWitching) 134
FinalThoughts 137
CHAPTER 5 The Greeks: The Forces That
Influence Options’ Prices 139
Delta 139
FinalThoughts 156
CHAPTER 6 Strategy: The Basic Options Trades 159
BasicSingleOptionsStrategies 160
TheLongCall 160
CoveredCall(Buy-Write) 171
Buy-WriteversusCoveredCall 175
LongPut 181
BasicStockandOptionsSpread 195
FinalThoughts 208