لایب سان

Author(s): Logue, Ann

Series: Idiot's guides

Publisher: DK Publishing, Year: 2016

ISBN: 9781615648627,9781615648818,161564881X,9781615648825,1615648828

Idiot’s Guides: Options Tradingvi 8 Call Strategies ............................................................................ 89 Basic Uses of Calls ........................................................................................................................................90 Why Use Long Calls .................................................................................................................................. 93 Being Short a Call ...................................................................................................................................... 93 The Call and Its Premium ......................................................................................................................94 Call Strategies .................................................................................................................................................95 Writing Covered Calls .............................................................................................................................. 95 Writing Naked Calls .................................................................................................................................96 Replacement Therapy ................................................................................................................................96 Call Spreads..................................................................................................................................................96 Butterfly Spreads ......................................................................................................................................100 Condors ........................................................................................................................................................ 104 How to Think About Calls .................................................................................................................. 106 9 Put Strategies ........................................................................... 109 Basic Uses of Puts .......................................................................................................................................110 Long Put Strategies ..................................................................................................................................112 Short Put Strategies .................................................................................................................................113 The Put and the Premium .....................................................................................................................114 Put Strategies.................................................................................................................................................114 Protective Puts ...........................................................................................................................................114 Naked Puts ..................................................................................................................................................115 Put Spreads .................................................................................................................................................115 Married Puts .............................................................................................................................................117 Butterflies ....................................................................................................................................................118 Condors .........................................................................................................................................................121 How to Think About Puts .................................................................................................................... 124 10 Combination Strategies ..........................................................125 Combination Spreads............................................................................................................................... 126 Back Spread ................................................................................................................................................126 Christmas Tree Spread ...........................................................................................................................127 Box Spread ..................................................................................................................................................127 Straddles and Strangles .......................................................................................................................... 127 Straddles ......................................................................................................................................................128 Short Straddle ............................................................................................................................................129 Strangles.......................................................................................................................................................130 Iron Butterflies and Iron Condors......................................................................................................133 Collars and Fences .....................................................................................................................................133 Rolls, Jelly and Plain .................................................................................................................................133 Contents vii Strips and Straps ......................................................................................................................................... 134 Repair Strategies ........................................................................................................................................ 134 Option Repair .............................................................................................................................................134 Stock Repair ................................................................................................................................................135 Part 3: Advanced and Synthetic Strategies .................................. 137 11 Futures, Forwards, and Related Derivatives ......................139 Defining Futures ........................................................................................................................................ 140 Types of Futures Contracts ....................................................................................................................140 Options on Futures ...................................................................................................................................141 Forward Contracts......................................................................................................................................141 Environmental Credits ............................................................................................................................141 Swaps ...................................................................................................................................................................142 Currency Swaps ........................................................................................................................................142 Interest Rate Swaps ..................................................................................................................................143 Commodity Swaps .....................................................................................................................................143 Swaptions ....................................................................................................................................................143 Collateralized Debt Obligations ........................................................................................................143 Credit Default Swaps ................................................................................................................................143 Repurchase Agreements ........................................................................................................................144 LEAPS and Weeklys................................................................................................................................144 12 Synthetic Securities .................................................................147 Setting Up Synthetics.............................................................................................................................. 148 A Synthetic Stock ....................................................................................................................................... 148 Long Synthetic Stock............................................................................................................................... 148 Short Synthetic Stock .............................................................................................................................. 150 Synthetic Options .......................................................................................................................................151 A Synthetic Call ........................................................................................................................................152 Long Synthetic Call..................................................................................................................................152 Short Synthetic Call.................................................................................................................................153 A Synthetic Put..........................................................................................................................................154 Long Synthetic Put ...................................................................................................................................155 Short Synthetic Put ..................................................................................................................................156 The Role of Interest ..................................................................................................................................157 A Reminder About Volatility .................................................................................................................158 Synthetics and Moneyness.....................................................................................................................158 What’s the Downside?..............................................................................................................................158 Idiot’s Guides: Options Tradingviii Why and How to Use Synthetics ..................................................................................................... 159 Can’t Borrow Shares to Short ..............................................................................................................159 No Exchange-Traded Product ..............................................................................................................159 Greater Efficiency on Some Hedges....................................................................................................160 13 Arbitrage..................................................................................... 161 The Law of One Price............................................................................................................................. 162 Arbitrage Strategies ...................................................................................................................................163 Simple Arbitrage ........................................................................................................................................163 Option Arbitrage .......................................................................................................................................164 Scalping ........................................................................................................................................................164 Synthetic Securities ..................................................................................................................................165 Conversion Arbitrage...............................................................................................................................165 Reversal ........................................................................................................................................................167 Box Spreads ................................................................................................................................................169 Interest Rate Arbitrage ............................................................................................................................170 Index Arbitrage ..........................................................................................................................................171 Merger Arbitrage ......................................................................................................................................171 Commissions, Taxes, and Other Considerations ....................................................................172 Commissions................................................................................................................................................172 Dividends ....................................................................................................................................................172 Interest ..........................................................................................................................................................173 Taxes .............................................................................................................................................................173 Problems and Downsides of Arbitrage...............................................................................................173 Pin Risk ........................................................................................................................................................174 High-Frequency Trading .......................................................................................................................174 14 Technical Analysis.....................................................................175 The Basics of Technical Analysis .....................................................................................................176 Intermediate Technical Analysis.......................................................................................................178 Trendlines ...................................................................................................................................................178 Moving Averages ......................................................................................................................................181 Breakouts......................................................................................................................................................182 Volatility.......................................................................................................................................................182 Reversals ......................................................................................................................................................184 Basic Chart Patterns ................................................................................................................................. 184 Pennants and Flags..................................................................................................................................185 Head-and-Shoulders ...............................................................................................................................186 Cup-and-Handle ......................................................................................................................................187 Gaps ...............................................................................................................................................................188 Contents ix Theories of Technical Analysis ........................................................................................................ 188 Fibonacci and Elliott Wave ...................................................................................................................189 Candlestick Charting...............................................................................................................................190 Gann..............................................................................................................................................................191 Putting It All Together ...........................................................................................................................191 15 Fundamental Analysis .............................................................193 Why Analysis Matters............................................................................................................................. 194 Starting with the Macroeconomy .................................................................................................... 194 U.S. Data Sources.....................................................................................................................................195 Global Data Sources ................................................................................................................................195 Analyzing the Underlying Asset....................................................................................................... 196 Single-Stock Options ...............................................................................................................................196 Financial Products ...................................................................................................................................197 Commodities ................................................................................................................................................198 Looking at the Calendar ........................................................................................................................ 199 Fundamental Analysis in Options Trading ...............................................................................200 Putting It All Together .......................................................................................................................... 201 16 Research Services....................................................................203 Determining Your Needs......................................................................................................................204 Your Trading Style ................................................................................................................................. 204 What Drives Your Market ...................................................................................................................205 How You Learn .........................................................................................................................................205 Research Relative to Performance .......................................................................................................205 Types of Research Services .................................................................................................................206 Data .............................................................................................................................................................. 206 Research and Analytics .......................................................................................................................... 207 Trade Ideas ................................................................................................................................................ 208 Training ...................................................................................................................................................... 208 Evaluating the Services ..........................................................................................................................209 Running Some Background Checks ................................................................................................... 209 Are They Running a Service or a Sales Pitch? ..............................................................................210 Using Your Broker ...................................................................................................................................211 Buyer Beware .................................................................................................................................................211 Part 4: The Business of Trading ...................................................... 213 17 Trade Planning...........................................................................215 Pick Your Markets ......................................................................................................................................216 Pick Your Timeframe ...............................................................................................................................216 Idiot’s Guides: Options Tradingx Set Your Goals ..............................................................................................................................................217 Are You Beginning or Advanced? ........................................................................................................217 Are You Speculating or Hedging? ........................................................................................................217 Return Targets...........................................................................................................................................217 The Probability of Ruin .........................................................................................................................218 Risk Limits ..................................................................................................................................................219 Time and Attention..................................................................................................................................219 Cash Management ......................................................................................................................................219 Fixed Fractional ........................................................................................................................................220 Fixed Ratio ..................................................................................................................................................220 Gann..............................................................................................................................................................221 Kelly Criterion ...........................................................................................................................................221 Martingale ..................................................................................................................................................222 Value at Risk...............................................................................................................................................222 Cost of Carry ................................................................................................................................................ 223 Plan Your Trade ... ................................................................................................................................... 223 How Much Money? ..................................................................................................................................223 Why Trade?.................................................................................................................................................223 For How Long? ...........................................................................................................................................224 ... and Trade Your Plan ......................................................................................................................... 224 Order Execution ........................................................................................................................................224 Sticking to Your Limits ..........................................................................................................................225 Keep a Trade Diary .................................................................................................................................. 225 Managing Your Profits ........................................................................................................................... 226 Compounding Returns with the Same Strategy .............................................................................226 Pyramiding..................................................................................................................................................226 Taking Money Off the Table ...............................................................................................................227 18 Taxes ...........................................................................................229 Income and Capital Gains .................................................................................................................... 230 Proceeds and Basis .....................................................................................................................................231 How Options Affect the Tax Basics ............................................................................................... 232 The Tax Rates, Applied ......................................................................................................................... 232 Dividends ....................................................................................................................................................232 Capital Gains .............................................................................................................................................233 Interest Income ...........................................................................................................................................236 Closing an Option Position.................................................................................................................. 237 Using an Offsetting Position ................................................................................................................237 Assignment or Exercise: Call Edition ................................................................................................237 Assignment or Exercise: Put Edition..................................................................................................237 Worthless Expiration ...............................................................................................................................238 Contents xi Straddles .......................................................................................................................................................... 238 Antistraddle Rules ....................................................................................................................................238 The Explanation .......................................................................................................................................238 Antistraddle and Offset Rule Exemptions........................................................................................239 Who Are You, Anyway? ......................................................................................................................... 239 Investors ...................................................................................................................................................... 240 Dealers ......................................................................................................................................................... 240 Traders ........................................................................................................................................................ 240 Options in Retirement Accounts ...................................................................................................... 241 Deducting Investment Expenses ...................................................................................................... 242 Research and Advice ................................................................................................................................242 How to Handle Commissions ................................................................................................................242 Investment Interest ...................................................................................................................................243 The One Expense You Can’t Deduct .................................................................................................243 Hiring a Tax Adviser ................................................................................................................................243 Types of Tax Advisers ............................................................................................................................243 Special Considerations for Traders ................................................................................................... 244 State Taxes................................................................................................................................................. 244 19 Evaluating Performance ......................................................... 247 Learn About Options, Not Strategies ........................................................................................... 248 Testing Before You Trade..................................................................................................................... 248 Backtesting...................................................................................................................................................249 Simulation ...................................................................................................................................................250 Tracking Trades.......................................................................................................................................... 251 A Simple Trading Diary ........................................................................................................................251 Spreadsheet ..................................................................................................................................................252 Setting Up a P&L ...................................................................................................................................252 Calculating Overall Performance .................................................................................................... 252 Types of Return .........................................................................................................................................252 Risk Calculation ........................................................................................................................................255 Benchmarking Performance ..................................................................................................................256 One Final Note............................................................................................................................................ 256 20 Training Your Brain ..................................................................259 Controlling Your Emotions .................................................................................................................260 Doubt .............................................................................................................................................................260 Fear ................................................................................................................................................................261 Greed .............................................................................................................................................................261 Overconfidence...........................................................................................................................................262 Anxiety..........................................................................................................................................................262 Boredom ........................................................................................................................................................263 Depression .................................................................................................................................................. 264 Importance of a Trading Plan ............................................................................................................264 Trading as a Thoughtful Endeavor.................................................................................................. 264 Evaluate Your Plan ................................................................................................................................ 264 Learning, Without Emotion ..................................................................................................................265 Having an Outlet........................................................................................................................................ 265 Balancing Life ............................................................................................................................................266 A Walk-Away Fund .................................................................................................................................266 If You Have a Problem ............................................................................................................................ 267 Appendixes A Glossary .....................................................................................269 B Resources ..................................................................................283 Index ............................................................................................291

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