Options as a Strategic Investment

Submitted by Book Library on 12 March, 2010 - 22:17

For those who want to learn options strategies thoroughly, this is the best book available. Begins with basic definitions and proceeds to the most complex strategies, all the way up to diagonal butterfly spreads and stock index arbitrage. The discussion of each topic is well-rooted in theory, yet explained in very practical and easily understood terms. Discussion of roll-up and roll-down strategies will benefit beginners as well as veteran traders. Thorough coverage of financial instruments, futures, and stock indexes.

Inside this Fourth Edition, you'll find the latest techniques and strategies for trading a variety of new, innovative options products including topics such as: *Long Term Equity Anticipation Securities, *Preferred Equity Redemption Cumulative Stocks, *Neutral Trading, *Futures Options, *Warrants, *Standard Portfolio Analysis of Risk, etc The options world has a lot to offer investors and traders alike, but it can be dauntingly hard to understand. Since its original publication, Options as a Strategic Investment has answered many a question; and each succeeding edition has answered many more. It is the options reference in our office. John Bollinger, CFA, CMT, President, Bollinger Capital Management, Manhattan Beach, California.

Larry McMillan’s Fourth Edition of Options as a Strategic Investment is a must read. This latest version of his original classic presents his latest thinking on options. McMillan is truly the master of his field. John Murphy, President Murphy Morris, Inc., Dallas, Texas Larry’s book is the bible of the options community. It has established the benchmark by which all other option books are compared - and none measure up. Alex Jacobson, Vice President International Securities Exchange, New York, New York Larry has taken options education into the 21st century with this book. His insights into trading concepts will always stand the test of time. Keeping up with the latest information on options is mandatory and no one does it more masterfully than Larry. Mark D. Cook, Professional Options Trader, Mark D. Cook Trading Instruction, East Sparta, Ohio The options product is the premier tool for managing risk, but most professionals are no longer taught about it, and individual investors shun it because of its supposed complexity. Mr. McMillan not only makes this risk management tool easy to understand, but fun to learn.

Did you realize that if you own a car you own a put? Read the book and find out how you are already using options as a risk management tool without realizing it. This book should be read by everyone professionals and individual investors alike. Thomas J. Dorsey, President Dorsey, Wright & Assoc., Richmond, Virginia. The best one-stop source of understandable option information that you can act on immediately. Every serious investor should read this book Ken and Daria Dolan, heard daily across America on the WOR radio network.

Positive Review of Book

Most people who trade stocks, options, or futures lose money. This is because they 1) are undercapitalized, 2) have no system or 3) don't understand the instrument they trade. 4) some combination of 1, 2, and 3. This book won't help you if you don't go into the market with enough money, but it will help you develop your own system (after a lot more research) and figure out how to use options to increase returns or limit risk. This book describes just about every fundamental strategy you could try with options. It covers the total return concept of covered call writing, the pros and cons of option buying, examines various types of spreads (vertical, calendar, and diagonal) and the various delta (price) neutral strategies. There is some advanced math here (in an appendix), but anyone of average intelligence and stock market knowledge could follow it. Don't pay attention to those reviewers who trash the book--they have no clue. I constantly refer to this book in order to gain a better understanding of different option strategies. No matter which direction option markets evolve, the information of this book will still apply.

Negative Review of Book

There was a time when Larry was the only show in town. However, those days are long gone. This book I bought and returned to the store. Too technical, filling space at times. I went to an Omega Research seminar where Larry spoke. The audience actually fell asleep. As I admit did I when Larry droned on. The book does the same it drones on about options with no application. I have to wonder can Larry actually trade or does he make his money from his high priced seminar series. Either the Schaeffer or Fontanills books are easier to follow. I bought both from Amazon at great prices.

Author Biography

Lawrence G. McMillan is the editor of The Option Strategist Newsletter and the author of numerous articles on options and investment trading. Formerly senior vice president of the Equity Arbitrage Department at Thomson McKinnon Securities, he currently publishes newsletters and gives seminars on options, manages money for private clients and trades his own account.

Table of Contents

  1. Part I - Basic Properties of Stock Options
    • Chapter 1 - Definitions
      • Elementary Definitions
      • Factors Influencing the Price of an Option
      • Exercise and Assignment: The Mechanics
      • The Options Markets
      • Option Symbology
      • Details of Option Trading
      • Order Entry
      • Profits and Profit Graphs
  2. Part II - Call Option Strategies
    • Chapter 2 - Covered Call Writing
      • The Importance of Covered Call Writing
      • Covered Writing Philosophy
      • The Total Return Concept of Covered Writing
      • Computing Return on Investment
      • Execution of the Covered Write Order
      • Selecting a Covered Writing Position
      • Writing Against Stock Already Owned
      • Diversifying Return and Protection in a Covered Write
      • Follow-Up Action
      • Special Writing Situations
      • Covered Call Writing Summary
    • Chapter 3 - Call Buying
      • Why Buy?
      • Risk and Reward for the Call Buyer
      • Which Option to Buy?
      • Advanced Selection Criteria
      • Follow Up Action
      • A Further Comment on Spreads
    • Chapter 4 - Other Call Buying Strategies
      • The Protected Short Sale (or Synthetic Put)
      • Follow Up Actions
      • The Reverse Hedge (Simulated Straddle)
      • Follow-Up Action
      • Altering the Ratio of Long Calls to Short Stock
      • Summary
    • Chapter 5 - Naked Call Writing
      • The Uncovered (Naked) Call Option
      • Investment Required
      • The Philosophy of Selling Naked Options
      • Risk and Reward
      • Summary
    • Chapter 6 - Ratio Call Writing
      • The Ratio Write
      • Investment Required
      • Selection Criteria
      • The Variable Ratio Write
      • Follow-Up Action
      • An Introduction to Call Spread Strategies
    • Chapter 7 - Bull Spreads
      • Degrees of Aggressiveness
      • Ranking Bull Spreads
      • Follow-Up Action
      • Other Uses of Bull Spreads
      • Summary
    • Chapter 8 - Bear Spreads Using Call Options
      • The Bear Spread
      • Selecting a Bear Spread
      • Follow-Up Action
      • Summary
    • Chapter 9 - Calendar Spreads
      • The Neutral Calendar Spread
      • Follow-Up Action
      • The Bullish Calendar Spread
      • Follow-Up Action
      • Using All Three Expiration Series
      • Summary
    • Chapter 10 - The Butterfly Spread
      • Selecting the Spread
      • Follow-Up Action
      • Summary
    • Chapter 11 - Ratio Call Spreads
      • Differing Philosophies
      • Follow-Up Action
      • Summary
    • Chapter 12 - Combining Calendar and Ratio Spreads
      • Ratio Calendar Spread
      • Choosing the Spread
      • Follow-Up Action
      • Delta-Neutral Calendar Spreads
      • Follow-Up Action
    • Chapter 13 - Reverse Spreads
      • Reverse Calendar Spreads
      • Reverse Ratio Spread (Backspread)
    • Chapter 14 - Diagonalizing a Spread
      • The Diagonal Bull Spread
      • Owning a Call for "Free"
      • Diagonal Backspreads
      • Call Option Summary
  3. Part III - Put Option Strategies
    • Chapter 15 - Put Option Basics
      • Put Strategies
      • Pricing Put Options
      • The Effect of Dividends on Put Option Premiums
      • Exercise and Assignment
      • Conversion
    • Chapter 16 - Put Option Buying
      • Put Buying versus Short Sale
      • Selecting Which Put to Buy
      • Ranking Prospective Put Purchases
      • Follow-Up Action
      • Loss-Limiting Action
      • Equivalent Positions
    • Chapter 17 - Put Buying in Conjunction with Common Stock Ownership
      • Which Put to Buy
      • Tax Considerations
      • Put Buyins As Protection for the Covered Call Writer
      • No-Cost Collars
    • Chapter 18 - Buying Puts in Conjunction with Call Purchases
      • Straddle Buying
      • Selecting a Straddle Buy
      • Follow-Up Action
      • Buying a Strangle
    • Chapter 19 - The Sale of a Put
      • The Uncovered Put Sale
      • Follow-Up Action
      • Evaluating a Naked Put Write
      • Buying Stock below Its Market Price
      • The Covered Put Sale
      • Ratio Put Writing
    • Chapter 20 - The Sale of a Straddle
      • The Covered Straddle Write
      • The Uncovered Straddle Write
      • Selecting a Straddle Write
      • Follow-Up Action
      • Equivalent Stock Position Follow-Up
      • Starting Out with the Protection in Place
      • Strangle (Combination) Writing
      • Further Comments on Uncovered Straddle and Strangle Writing

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