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Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks, CourseSmart eTextbook, 2nd Edition

By W. Olmstead

Published by FT Press

Published Date: Dec 19, 2012

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Master options trading strategies hands-on with Options for the Beginner and Beyond, Second Edition, the brand-new edition of Dr. W. Edward Olmstead's worldwide best seller!


Olmstead has kept all the features that made his first edition so popular: brief, carefully-paced lessons on options concepts and trading strategies, crystal-clear definitions, and plenty of real trading examples. This edition integrates new coverage of weekly options throughout, and presents updated tax strategies every trader needs to know. Every lesson builds on the one preceding it, explaining options in plain English from start to finish.


Olmstead offers step-by-step coverage of controlling risk and protecting your investments, and introduces advanced strategies other introductory books ignore. Drawing on years of experience teaching options (and five years editing a leading options newsletter), he guides you through:

  • Basic Concepts: selecting options, entering/exiting trades, choosing brokers, working with Greeks, risk graphs, LEAPs, and more
  • Trading Strategies: Vertical, event producing, and calendar spreads; covered calls, straddles, strangles, married puts, collars, naked options, stock substitutes, backspreads, butterfly spreads, iron condors, and double diagonals; end-of-year tax strategies, and more
  • Special Topics: day trading indexes with options; delta-neutral trades; theory of maximum pain; implied volatility/Black-Scholes; and put-call parity relationships

Table of Contents

Acknowledgments     xii
About the Author     xiii
Preface     xiv
Section I Basic Concepts     1
Chapter 1 Introduction     3
Why Options?     3
The Basic Concept of Options     4
Major Differences Between Stocks and Options     4
A Detailed Explanation of Options     7
Comments     15
Chapter 2 Option Selection     17
What Is a Cheap Option?     17
Selecting a Call     20
Overall Evaluation     24
Selecting a Put     24
Chapter 3 Entering and Exiting Option Trades     25
Entering a Trade     27
Exiting a Trade     28
Chapter 4 The Greeks     31
Delta     31
Theta     35
Gamma     36
Vega     37
Rho     38
Chapter 5 Risk Graphs     39
Single Option Trade     40
Multiple Option Trade     42
Comments     44
Chapter 6 LEAPS and Weekly Options    45
LEAPS     46
Weekly Options     50
Chapter 7 Assignment Anxiety     53
Comments     55
Applications     56
Chapter 8 Broker Selection     59
Types of Brokers     59
Commissions     60
Trading Platform     61
Margin and Trading Limitations     62
Level 3 Trading     63
Live Broker Assistance     63
Comments     64
Chapter 9 Miscellaneous Tips     65
Time Is Money     65
Trading with the Trend     66
Risk Capital for Options Trading     66
Tracking Trades     67
Anticipating Events     68
Real-Time Quotes     68
Market Orders with Options     69
Options Calculator     69
Section II Trading Strategies     71
Chapter 10 Vertical Spreads     73
Debit Vertical Spreads     74
Credit Vertical Spreads     77
Comments     80
Vertical Spreads with Weekly Options     80
Chapter 11* Event-Producing Credit Spreads     81
Comments     87
Chapter 12 Calendar Spreads     89
The Rollout Maneuver     93
Comments     94
Calendar Spreads with Weekly Options     95
Chapter 13* Advanced Calendar Spreads     97
Volatility Skew Trades     97
Ratio Calendar Spread Trades     101
Deep-in-the-Money LEAPS Put Calendar Spreads     103
Diagonal Calendar Spread Trades     106
Chapter 14 Covered Calls     111
An Idealized Trade     112
A Realistic Trade     112
Covered Call Versus Naked Put     114
Comments     117
Covered Calls with Weekly Options     118
Chapter 15 Straddles and Strangles     121
The Straddle Trade     121
The Strangle Trade     127
Straddles and Strangles with Weekly Options     128
Chapter 16 Stock Repair and Stock Enhancement     131
Stock Repair Strategy     132
Stock Enhancement Strategy     135
Chapter 17 Married Puts     139
Comments     143
Married Puts with Weekly Options     143
Chapter 18 Collars     145
Comments     152
Chapter 19* Advanced Collars     155
Comments     162
Chapter 20 Naked Option Writing     163
The Risk of Naked Option Writing     164
Acquiring Stock with Naked Puts     168
Comment     169
Chapter 21 Stock Substitutes     171
Matching the Stock Delta     171
Synthetic Long Stock     171
Deep-in-the-Money Put     174
Deep-in-the-Money Call     176
Chapter 22 Backspreads     179
Comments     185
Backspreads with Weekly Options     185
Chapter 23 Butterfly Spreads     189
Standard Butterfly Trade     189
Butterfly Trade with Adjustments     192
Unbalanced Strikes Butterfly Trade     195
Unbalanced Contracts Butterfly Trade     197
Chapter 24 Iron Condors and Double Diagonals     201
The Iron Condor Trade     201
The Double Diagonal Trade     204
Comments     206
Iron Condors and Double Diagonals with Weekly Options     207
Chapter 25 An End-of-Year Tax Strategy     209
Tax Code Restrictions     209
Qualified Covered Calls     210
Basic Strategy     211
Follow-Up Variations     214
Comments     215
Section III Special Topics     217
Chapter 26* Day Trading an Index with Options     219
Comments     222
Chapter 27* Delta-Neutral Trading     223
Review of the Delta Concept     223
A Delta-Neutral Portfolio     225
Delta-Neutral Trading for a Profit     227
Chapter 28* Theory of Maximum Pain     229
Chapter 29* Implied Volatility and the Black-Scholes Formula     233
Historical Background    233
Implied Volatility     236
Applications of Implied Volatility     237
Comments     237
Chapter 30* The Put-Call Parity Relationship     239
Calls Cost More Than Puts     239
Applications of Put-Call Parity     242
Index    243

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Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks, CourseSmart eTextbook, 2nd Edition
Format: Safari Book

$14.99 | ISBN-13: 978-0-13-287646-9