Using Options to Buy Stocks is divided into four sections: The first one consists of Chapters 1 through 5 and describes the basic approach in using long-term options to further investment programs. The second section, Chapters 6 through 12, refines this approach and shows how to institute controls to reduce risk. The potential reward and the long-term safety of the basic approach and refinements are established through extensive computer simulation and backtesting. This is accomplished by going back ten years and asking what would have been the outcome if the various techniques had been applied in as consistent a manner as possible during that period.
The third section, Chapters 13 through 15, contains the analytic formulas for the rapid computation of volatility and option premiums for both European- and American-style options. The 1997 Nobel prize in economics was awarded to Myron Scholes and Robert Merton, who along with Fischer Black were the original developers of these formulas. With minor variations, they are still used today for calculating option premiums by market makers and option traders alike.
Although college mathematics is needed to understand the formulas, the short, simple algorithms given for their numerical evaluation can be used by virtually anyone who knows BASIC or can set up a spreadsheet on a personal computer. For readers without access to computer tools, there are various appendices containing tables for looking up option premiums and assignment probabilities. Finally, Chapters 16 and 17 contain suggested resources for additional information, including Internet Web sites and capsule reviews of introductory, intermediate, and advanced books on options.
Contents:
- Long-Term Options
- Basic Strategy
- Margin
- Disposition and Taxes
- Baseline Analysis
- Eliminating Dogs
- Out-of-the-Money LEAPS
- Roll ‘Em Out
- Buy ‘Em Out
- Advanced Strategies
- Hedging for Disaster
- Measuring Volatility
- Option Premiums
- American-Style Options
- My Favorite Web Sites
- Selected Bibliography
Using Options to Buy Stocks: Build Wealth With Little Risk and No Capital By Dennis Eisen pdf
