Equity and Index Options Explained

In 2007 over 400 million equity option contracts were traded but it is a volatile market, prices are ever changing with supply and demand – the only certainty is that they will change. With little knowledge or experience, an uninformed decision can quickly drain capital. This book explains equity options from absolute basics, assuming no prior knowledge of the subject. It shows traders starting out and already using the exchanges how to enhance their equity portfolio by using the whole range of investment opportunities and tools available. This will help investors to reduce their costs, enhance returns and manage price risk with certainty and precision. Equity Options Explained is a practical guide to trading equity options, supported by Liffe (part of the NYSE Euronext exchange group). Written by Bill Beagles, a well known, highly experienced trader and trainer, creating a unique combination in this area.  Bill is still highly active in the markets, which brings a practical perspective to his training and the books.

Foreword vii Preface: Trading Language and Products ix 1 Option Basics 1 2 Option Specifications 9 3 Exercise and Assignment 13 4 Option Uses 19 5 Option Price and Value 31 6 “Moneyness” 39 7 Pricing Options 43 8 Skew 61 9 Option Pricing Revisited: the “Greeks” 71 10 Basic Option Strategy 95 11 Option Spreads 105 12 The Collar (Fence) 107 13 Long Call Spreads (Bull Call Spreads) 119 14 Long Put Spreads (Bear Put Spreads) 127 15 Short Call Spreads (Bear Call Spreads) 139 16 Short Put Spreads (Bull Put Spreads) 147 17 Selling Naked Puts versus Selling Put Spreads 151 18 Long Verticals versus Short Verticals 157 19 Long Straddles 161 20 Long Strangles 167 21 Short Straddles 173 22 The Iron Butterfly 179 23 Short Strangles 185 24 The Iron Condor 187 25 Calendar Spreads 193 26 Long Call Calendars 195 27 Short Call Calendar Spreads 201 28 Long Put Calendar Spreads 205 29 Short Put Calendar Spreads 209 30 Diagonal Spreads 213 31 Yield Enhancement 219 32 Gamma Trading 223 33 Resources 233 34 Summary 235 Glossary 237 Index 247