Trading Options For Dummies explains the common types of options and helps you choose the right ones for your investing needs. You find out how to weigh option costs and benefits, combine options to reduce risk, and build a strategy that allows you to gain no matter what the market may bring. You’ll learn the basics of market and sector analysis and what to look for when trying out a new option strategy. You’ll also find what you need to know about options contract specifications and mechanics.
There are a ton of trading titles out there, including those focusing on option strategies. This book focuses primarily on approaches aimed at managing risk, the consistent theme throughout. By setting it up this way, you can cover different topics while keeping that key objective in mind. So go ahead, jump around to areas that interest you most. This book can be read from cover to cover or used as a reference guide. Each strategy provided identifies risks and rewards associated with the position. It also identifies alternative strategies to consider for risk management, when applicable. There are a million ways to successfully trade the markets, but certain challenges are universal to all of them. Tools and techniques focused on addressing these challenges are also provided throughout. This book allows you to move from topic to topic in any order or serves as a start to finish guide for option trading. Use it whatever way best suits your needs.
I’ve broken this book into five main parts, any of which provide you with option-focused trading insights. Whether you want an options primer or review, basic strategies or those that are more advanced, or insights from the options market, each one has its place in this book and can be found in the following parts:
Part I: Getting Started: This part provides you with an introduction to option contracts, including rights and obligations for option buyers and sellers. It identifies how you trade these securities on exchanges, along with how your rights and obliga-tions are satisfied. As with any security, you must understand the risks and rewards associated with these contracts. Part I provides foundational risk and reward information for you.
Part II: Evaluating Markets, Sectors, and Strategies: Trading options don’t begin by running out to buy a call or put. It’s the culmination of your analysis on the markets, sectors, and the underlying security for your trade. This part provides market assessment methods using breadth and sentiment analysis then moves on to technical analysis of sectors. It also incorporates the options market in this analysis. Because you may be exploring new strategies, you also want to evaluate those strategies in a systematic way to reinforce your understanding of them while also addressing the unique characteristics of options, such as trading costs and order placement methods, which I provide in this part.
Part III: What Every Trader Needs to Know About Options: Options provide you with some distinct trading advantages, but as with other types of securities, they are not without risk. In fact, used the wrong way, they can be very risky. By understanding option styles and the risks associated with each you can manage that risk. Even if you choose to use options on a limited basis, you can consider a few core strategies to limit your overall market risk. These can be implemented with existing stock positions, single option positions, or through combination option positions. All the strategies provided in this part focus on alternative, reduced risk approaches to stock positions. Exchange-traded funds (ETFs) and option strategies using ETFs are also discussed here to provide some insights on ways to reduce portfolio volatility as well as single stock risk.
Part IV: Advanced Strategies for Option Traders: Option strategies go beyond stock trading alternatives. When trading options you can benefit from large moves in a stock, regardless of the direction of the move when using the right strategy. There are also ways you can create a perfectly hedged position that has minimal risk from moves in the underlying. Through position adjustments you can maintain a completely neutral market view, but still profit. The key to these strategies is changing volatility — a topic addressed throughout this part.
Part V: The Part of Tens: The chapters in this part include summaries for great option strategies aimed at reducing your risk. After you reduce your risk, you can look toward increasing reward . . . . also covered here. I also address key elements all traders must address to be successful with a bent toward option traders.
- Options Trading and Investing
- Introducing Options
- Trading Places: Options for Stocks
- Option Risks and Rewards
- Tapping Into the Market’s Mood
- Targeting Sectors with Technical Analysis
- Kicking the Wheels of a New Strategy
- Mapping Out Your Plan of Attack
- Getting a Handle on Option Styles
- Guarding Your Assets with Options
- Limiting Your Downside When Trading the Trend
- Combining Options to Limit Your Position Risk
- Benefiting from Exchange-Traded Funds
- Profiting Without a Market Outlook
- Keying In on Volatility for Trading Opportunities
- Capitalizing When Markets Move Sideways
- Ten Top Option Strategies
- Ten Do’s and Don’ts in Options Trading
Trading Options For Dummies By George A. Fontanills pdf