Options as a Strategic Investment

Options as a Strategic Investment

by Lawrence G. McMillan


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The market in listed options and non-equity option products provides investors and traders with a wealth of new, strategic opportunities for managing their investments. This updated and revised Fifth Edition of the bestselling Options as a Strategic Investment gives you the latest market-tested tools for improving the earnings potential of your portfolio while reducing downside risk—no matter how the market is performing.

Inside this revised edition are scores of proven techniques and business-tested tactics for investing in many of the innovative new options products available. You will find:

•Buy and sell strategies for Long Term Equity Anticipation Securities (LEAPS)
•A thorough analysis of neutral trading, how it works, and various ways it can improve readers’ overall profit picture
•Detailed guidance for investing in Preferred Equity Redemption Cumulative Stocks (PERCS) and how to hedge them with common and regular options
•An extensive overview of futures and futures options

Written especially for investors who have some familiarity with the option market, this comprehensive reference also shows you the concepts and applications of various option strategies — how they work, in which situations, and why; techniques for using index options and futures to protect one’s portfolio and improve one’s return; and the implications of the tax laws for option writers, including allowable long-term gains and losses. Detailed examples, exhibits, and checklists show you the power of each strategy under carefully described market conditions.

Product Details

ISBN-13: 9780735204652
Publisher: Penguin Publishing Group
Publication date: 08/07/2012
Pages: 1072
Product dimensions: 7.90(w) x 9.30(h) x 2.36(d)
Age Range: 18 Years

About the Author

Lawrence G. McMillan is a professional trader and the author of the bestselling Options as a Strategic Investment. He appears regularly on CNBC and Bloomberg TV, and is the recipient of the prestigious Sullivan Award due to his contribution to the growth and integrity of the US options markets. He is founder and president of McMillan Analysis Corporation.

Table of Contents

How to use this study Guide vii

Lesson 1 Definitions 1

Lesson 2 Covered Call Writing 9

Lesson 3 Call Buying 16

Lesson 4 Other Call Buying Strategies 23

Lesson 5 Naked Call Writing 30

Lesson 6 Ratio Call Writing 37

Lesson 7 Bull Spreads Using Call Options 44

Lesson 8 Bear Spreads Using Call Options 50

Lesson 9 Calendar Spreads 54

Lesson 10 The Butterfly Spread 58

Lesson 11 Ratio Call Spreads 62

Lesson 12 Combining Calendar and Ratio Spreads 66

Lesson 13 Reverse Spreads 70

Lesson 14 Diagonalizing a Spread 74

Lesson 15 Put Option Basics 78

Lesson 16 Put Option Buying 84

Lesson 17 Put Buying in Conjunction with Common Stock Ownership 89

Lesson 18 Buying Puts in Conjunction with Call Purchases 93

Lesson 19 The Sale of a Put 98

Lesson 20 The Sale of a Straddle 102

Lesson 21 Synthetic Stock Positions Created by Puts and Calls 106

Lesson 22 Basic Put Spreads 111

Lesson 23 Spreads Combining Calls and Puts 116

Lesson 24 Ratio Spreads Using Puts 121

Lesson 25 Long-Term Option Strategies 126

Final Examination 133

Final Examination Answers 163

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