About the Author
К оглавлению1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1617 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101
102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118
119 120 121 122 123 124 125 126 127 128
Kenneth R. Trester is recognized as a leading international
options advisor. He is a popular speaker at financial conventions
and options trading seminars and has even given seminars in
Russia. Through his market letters, he has originated many of
the options strategies that are industry standards today.
Ken Trester is the author of The Complete Option Player,
now in its 4th edition. It was followed by The Option Players Advanced
Guidebook. Other works include a comprehensive options
home study course, Secrets to Stock Option Success, and
software for options trading, Option Master®, The Push-Button
Option Trader and The Push-Button Option Writer. He has written
numerous articles that have been quoted in such publications
as Barrons and is a contributing author to the
Encyclopedia of Stock Market Techniques. Ken Trester also coauthored
the book, Complete Business BASIC Programming. Besides,
Ken Trester is the editor of The Put & Call Tactician
Advisory Service.
Ken Trester has been trading options since the options exchanges
first opened in 1973. His background combines systems
analysis, operations research and investment management. He
has been the president of a management consulting firm and an
Assistant Professor of Management at the California State University,
Fresno and in the Computer Science Department at
Golden West College. He holds a B.S. and M.B.A. from Utah State
University and has done post graduate work at the University of
Oregon.
60% rule, 52, 260
A
Advisory services, 261–262
AI (Artificial Intelligence) programs,
189–192
Alligator spreads. see Option spreads
Analysis. see Option analysis
Asked price (sell price), 217–218
buying at, 228
limit order and, 224
market makers and, 221
market order and, 224
stop-loss orders and, 248
Asset allocation plan, 267–268
B
Bargain options
identifying, 61–62
see also Cheap options
Baysian Analysis, 181–185
Baysian Decision Rule, 183–184
Beat the Dealer (Thorp, Edward), 281
Beat the Market (Thorp, Edward), 281
Bid price (buy price), 217–218
market makers and, 221
selling at, 228
stop-loss orders and, 248
Black and Scholes model, 156
Bond funds, 267–268
Breakouts, 39
Brokerage firms, online, 218
Bullish strategies, 54
Butterfly spreads. see Option spreads
Buying Leaps®, 268
Buying options. see Option buying
Buy price. see Bid price (buy price)
C
Calendar spread. see Option spreads
Call options
buying, 87–89, 99–100, 115–116
theoretical performance of, 5
writing naked calls, 126
see also [aaa}specific topics
Cash, 267
CBOE Market Volatility Index (VIX),
36–37, 54
Chaos theory, 21
and market declines, 108
and surprise events, 94
and surprise volatility, 115, 136, 271
Charts, 39–41
cheap options and, 272
as predictors of the future, 40–41
for stock near or at top, 53
Cheap options
advantages of, 271–272
grand master plan and, 268
home run options and, 65–67
last month before expiration, and,
73–74
naked writing and, 128
time as asset, 71–72
Collar, 143–144
Commissions, reducing, 217–218
Commodities
60% rule, 52, 260
debit spreads for, designing rules for,
209–210
options, 43, 209–210, 274
seasonal tendencies and, 48–49
supply and demand, effect on, 43
Computers and prediction, 33–34, 51,
88–89
for option analysis, 159–160, 165–167,
172–174, 177–178, 185, 187–192
Conquer the Crash (Prechter, Robert R.,
Jr.), 108
Contrary investors, 35–37
Contrary theory, 79
Costs
reduction through spreads, 207–208
slippage and, 197–198, 201, 217–218,
221–222
sunk costs, 245–246
Covered call writing
disadvantages of, 143–144
grand master plan and, 268
strategies, 145–146
when to use, 139–140
Crashes. see Stock market crashes
Credit spreads. see Option spreads
D
Debit Leaps® spread, 287–289
Debit spreads. see Option spreads
Delta (“bang for your buck”)
delta neutral strategies, avoiding, 203,
260
option analysis and, 169–170, 260
Demand. see Supply and demand
Diversification, 101–102
Dollar averaging, 52
E
Education
internet resources and, 256–257
requirements for, 7–8
Ego, 9, 235–236
Emotions, controlling, 235–236
End of the month phenomenon, 48
Euphoria, 35–37
Events
contrary theory and, 79–80
and surprise volatility, 93–95, 253–254
Executions
of spread orders, 228
see also Trade executions
Exit points, 247
Expiring options, 115–116
diagonal spreads and, 283–286
index credit spreads and, 279–280
F
Fear, 35–37
Feelings, 182–183
Financial instruments, 111–113
Forecasting techniques, 34
Fundamentals, 40–41
Fun money, 241–242
grand master plan and, 268
Futures
buying, 147–151
contracts, 44–45
debit Leaps® spread and, 289
options, 58
prices, 59, 69–70, 163–164, 167, 260
seasonal tendencies and, 48–49
surrogates for, 288
technical charts and, 39–41
tutorial, 295–309
see also Predicting the markets
G
Game plan
grand master plan and, 267–268
proper planning and, 263–264
Genetic algorithms, 34
Grand master plan, 267–268
Greed, 9
Group behavior, 35–37
Gurus, 31–32, 261
H
Hedging, ratio hedges and, 281–282
Hesitation, 70
Highs
supply and demand, effect on, 44
upward trend, likelihood of, 39–41
Historical volatility, 163–164, 167, 260
Hold period, 72
Holidays, 48
Home run options, 65–67
Hot seat concept, 133–134
I
Implied volatility
cheap options and, 272
debit spreads and, 207–208
option analysis and, 165–167, 260, 272
Indexes
CBOE Market Volatility Index (VIX),
36–37, 54
debit spreads for, designing rules for,
209–210
expiring options, buying, 115–116
index credit spread and, 275–277,
279–280
index funds, investment in, 19–20, 52
investment in, 52
Nasdaq Volatility Index (VNX), 54
predicting prices of, 20
S&P 100 Index (OEX), 54
writing index options on, 275
see also Predicting the markets
Inertia, 105
countering, 86
option buying and, 59–60
Institutional influence, 94–95
put option buying and, 99–100
Insurance
financial instruments as, 111–113
grand master plan and, 268
put option buying as, 107–110
structured products as, 111–113
Internet trading
advantages of, 213–214
and controlling order, 224
emotions and, 235–236
internet resources and, 256–257
online brokerage firms and, 218
spreading tactics and, 229–230
trading office as war room, 235–236
web-based scanning programs and,
177–178
Intuitive feelings, 182–183
Investment
60% rule, 51–52, 260
see also [aaa}specific topics
L
Leaps®, 281
Leaps® spreads, 268
Limit order, 224
limit spread orders, 227, 230
Limit price, 221–222
testing the waters, 223–224
Long term options, 281–282
Losing streaks, 24–25
diversification and, 102
fun money and, 241–242
Losses
and buying expiring options, 115–116
cheap options and, 272
cutting, quickness and, 105
inertia and cutting losses, 86
losing control of spread and, 229
losing streaks, 24–25, 102, 241–242
option writing and, 138
ratio hedge and, 281–282
repair strategies and, avoiding, 205
stop-losses and, 247–249
sunk costs and, 245–246
taking, 235–236, 243
Lows
downward trend, likelihood of, 39–41
supply and demand, effect on, 44
Luck, 31
M
Magic Pyramid, 267–268
Market declines
getting out when, 239
index credit spreads and, 276–277
put option buying, insurance against,
107–110
Market makers
acting like, 221–222
and limiting size, 231–232
Market order, 224
Markets
60% rule, 52, 260
bottom, determining, 54
CBOE Market Volatility Index (VIX)
and, 36–37
declines, 107–110, 239, 276–277
efficiency of, 20–21
extremes, procedure when, 35–37
profit probability and, 167, 171–174,
181–185, 260
randomness of, 20–21, 39, 51–52
regression back to the mean, 27–28
surprise volatility and, 93–95, 253–254,
271, 275–276
see also [aaa}specific topics; Predicting
the markets; Stock market
Market Wizards (Schwager, Jack D.), 80
Maverick investors, 35–37
Mutual funds
grand master plan and, 268
portfolio insurance, 107–110
reversion back to the mean, 28
underperformance of, 19–20
N
Naked writing
aggressive writing with limited risk,
275–277
defensive steps for, 137–138
distance and, 129
exiting, timing of, 133–134
of expiring put options, 135–136
grand master plan and, 268
as high risk trade, 9
naked put writing, 147–148
win-win strategy for, 149–151
of out-of-the money options, 128–129
probability and, 127–129
of puts and calls, 126
ratio hedge and, 281–282
risk of, 9, 125–126
risk removal through spreads, 195
situational analysis and, 179–180
spreads and, 195–196
stop-losses and, 247–249
surprise volatility and, 134, 136, 148,
275–276
time and, 129
Nasdaq Volatility Index (VNX), 54
Neural nets, 34
News
and predicting the markets, 40–41
“sell on,” 40
situational analysis and, 179–180
surprise volatility and, 93–95, 253–254
O
OEX. see S&P 100 Index (OEX)
Online trading. see Internet trading
Option advisory services, 261–262
Option analysis
analyzing option position, 83–84
Baysian Analysis and, 181–185
cheap options and, 272
computer programs for, 159–160
and delta (“bang for your buck”),
169–170, 260
fair value of option, 163–167, 260, 272
information overload, 259–260
mathematical measurement models for,
155–156
paralysis, avoiding, 259–260
Percent to Double calculation tool for,
profit probability, 167, 171–174,
181–185, 260
scanning programs for, 177–178,
257–258
situational analysis and, 179–180
software programs for, 159–160,
165–167, 172–174, 177–178, 185,
187–192, 257–258
volatility and, 163–164
Option buying
advantages of, 57, 97
AI programs for, 189–192
analyzing option position, 83–84
bargain options, 61–62
buying expiring options, 115–116
buy on dips, 291
call option buying, 99–100, 115–116
cheap options, 58, 60–62, 271–272
cost reduction through spreads,
207–208
of covered call writing, 140
debit Leaps® spread and, 289
debit spreads and, 207–208
and delta (“bang for your buck”),
169–170, 260
diversification in over time, 101–102
fun money and, 241–242
high-price options, effect, 57–59
hold period, 72
home run options, 65–67
hot seat concept and, 134
hype and, 77–78
index options, 115–116
inertia and, 59–60, 105
last month before expiration, and,
73–74
limit price and, 221–222
low-price options, effect, 58, 60
odds of winning, 23–25
patience and, 77
Percent to Double calculation tool for,
171
Profit Box and, 85–86
profit probability, 167, 171–174,
181–185, 260
proper planning and, 263–264
put option buying, 36, 99–100, 107–110
risk reduction by, 13–14
rules of the road, 273–274
spreads and. see Option spreads
stop-losses and, 247–249
straddles and, 87–89
sunk costs and, 245–246
surprise volatility and, 93–95, 97, 105,
253–254, 271
time as asset, 71–72
time as enemy, 71
undervalued options, identifying, 61–62
unrealistic expectations and, 77–78
worth determination, 84
Option game
tutorial, 295–309
see also [aaa}specific topics
Option Player’s Advanced Guidebook,
The (Trester, Kenneth R.), 173
Option plays
aggressive writing with limited risk,
275–277
best plays, scanning programs for,
177–178, 257–258
cheap options, 271–272
diagonal spreads, 283–286
fun money and, 241–242
grand master plan and, 268
limiting size, 231–232
proper planning and, 263–264
ratio hedges, 281–282
rules of the road, 273–274
situational analysis and, 179–180
Option positions
analyzing, 83–84
best plays, scanning programs for,
177–178, 257–258
diversification in over time, 101–102
last month before expiration, and,
131–132
Option prices
analyzing option position and, 83–84
asked price (sell price), 217–218, 221,
224, 228, 248
bid price (buy price), 217–218, 221,
228, 248
call options, 100
cheap options and, 272
and delta (“bang for your buck”), 260,
169–170
flexibility and, 225–226
historical volatility, 163–164, 167, 260
implied volatility, 165–167, 207–208,
260, 272
during market declines, 54, 239
naked writing and, 128–129
option buying, 58, 60, 221–222
option buying and, 57–59
paying more, advantage of, 225–226
as predictors of the future, 41
Profit Box and, 85–86
put options, 100
spread prices, 227–228
stop-loss orders and, 248
sunk costs and, 245–246
surprise volatility and, 93–95, 97,
253–254, 271
testing the waters, 223–224
volatility of, 163–167, 207–208, 260,
272
worth determination and, 84
Options
call options, 5, 87–89, 99–100,
115–116, 126
cheap options, 65–67, 71–74, 128, 268,
271–272
depreciation of, 59, 71, 73
hold period, 72
long term options, 281–282
markets, statistical advantage in, 178
put options. see Put options
theoretical performance of, 4–5
true value of, 155–156
see also [aaa}specific topics
Options as a Strategic Investment
(MacMillan, Larry), 7
Option spreads
advantages of, 195–196
alligator spreads, avoiding, 201
butterfly spreads, avoiding, 197–198,
201
calendar spread, 207–208, 283–286
complex spreads, avoiding, 201
credit spreads, 195, 227–228, 247–249,
268
debit Leaps® spread, 287–289
debit spreads, 195, 207–210, 227–228,
268
delta neutral strategies, avoiding, 203
diagonal spreads, 268, 283–286
grand master plan and, 268
index credit spreads, 275–277, 279–280
Leaps® spreads, 268
long term option debit spread, 287–289
losses, taking, 243
ratio spreads, 268, 282
repair strategies, avoiding, 205
spread positions, 227–230
straddles, 87–89, 195
straps, 195
stripes, 195
time spreads, 283–286
trades, 197–198, 201
vertical spread, 207–208
see also Spreads
Option strategies
60% rule, 52, 260
homework, importance of, 15–16
randomness and, 20–21
ratio hedge, 281–282
worth determination and, 84
Option Strategist, The (MacMillan,
Larry), 262
Option trading
advantages of, 3–5, 21, 34
analysis for. see Option analysis
education requirements for, 7–8
emotions, controlling, 235–236
fun money and, 241–242
homework prior to, 15–16
inertia and, 105
limiting size, 231–232
losing streaks, 24–25
minimizing trading, 197–198, 218
passing on the trade
option analysis and, 160
patience and, 91
playing on paper, 9–10
proper planning and, 263–264
repair strategies, avoiding, 205
risk reduction through, 4–5
track record and, 251
trading office as war room, 235–236
see also [aaa}specific topics; Internet
trading; Option buying; Trade
executions
Option writing
advantages of, 121
aggressive writing with limited risk,
275–277
buying back the option, 120
closing out position and obligation, 120
as consistent income source, 120
covered call writing, 139–140, 143–146
debit Leaps® spread and, 289
debit spreads and, 207–208
defensive steps for, 137–138
and delta (“bang for your buck”),
169–170, 260
exiting, timing of, 133–134
hot seat concept and, 133–134
last month before expiration, and,
73–74, 131–132
longer term puts, 151
losses, taking, 243
naked writing. see Naked writing
of out-of-the-money options, 133–134
profit probability, 167, 171–174,
181–185, 260
and risk, 9, 123–126
as selling options, 120
sell on rallies, 291
shorter term puts, 151
short term options, 123
spreads and. see Option spreads
stop-losses and, 247–249
surprise volatility and, 133–134,
253–254, 275–276
taking and paying off the bet, 119–120
time and, 129, 131–132
winning at, 121, 123–124
and writing expiring put options,
135–136
Orders
limiting size, 231–232
limit orders, 224
limit spread orders, 227, 230
market orders, 224
stop-loss orders, 247–249
Overvalued options
best plays, scanning programs for,
177–178, 257–258, 272
edge advantage of, 291
ratio hedge and, 281–282
P
Panic, 54
Paper trading, 9–10
Patience, 91
and buying expiring options, 115–116
and naked writing of expiring put
options, 136
Percent to Double calculation tool, 171
Performance
managing portfolio and, 15
proper planning and, 263–264
theoretical performance, 4–5, 77–78
track record and, 251
Portfolio
call option buying and, 99–100
diversification in over time, 101–102
grand master plan and, 267–268
insurance, 107–113
managing, importance of, 15
put option buying and, 99–100
scaling and, 75–76
Positions
diversification in over time, 101–102
last month before expiration, and,
73–74
scaling into, out of, 75–76
starting with small positions, 14
Predicting the markets
60% rule, 52, 260
computers and, 33–34, 51
extremes, procedure when, 35–37
forecasting techniques, 34
genetic algorithms and, 34
gurus and, 31–32
methods, 33–34
neural nets and, 34
news and, 40–41
odds of winning, 23–24
option prices as predictors of the
future, 41
randomness and, 19–21
regression back to the mean, 27–28
seasonal tendencies and, 47–49
success and, 31–32
using charts, 39–41
Probability
Baysian Analysis and, 181–185
cheap options and, 272
debit Leaps® spread and, 287–289
index credit spreads and, 276
naked writing and, 127–129
ratio hedges and, 281–282
subjective probabilities, 182–183
see also Profit probability
Profit
cheap options and, 272
debit Leaps® spread and, 287–289
diagonal spreads and, 283–286
fast profits, option writing and,
123–124
goals, 39, 172–174, 185
hot seat concept and, 134
implied volatility and, 167, 260, 272
index credit spreads and, 277
inertia and, 86
letting ride, 67
long term profit strategies, 156
patience and, 77, 91
probability. see Profit probability
Profit Box and, 85–86
proper planning and, 264
ratio hedge and, 281–282
scaling into, out of options, and, 75–76
for stock near or at top, 53
straddles and, 87–89
taking, 67, 69–70, 105, 109–110,
248–249
trailing stop-loss and, 248–249
unrealistic expectations of, 77–78
Profit Box, 85–86
Profit probability, 155, 260
Baysian Analysis and, 182–183
option analysis for, 167, 171–174,
181–185, 260
of option buying, 167, 171–174,
181–185, 260
option spreads and, 195–196
of profit, 155, 260
simulators, 172–174, 185
simulators and, 172–174, 185
subjective probabilities and, 182–183
Psychology, 35–36
Put option buying, 36
generally, 99–100
as portfolio insurance, 107–110
purpose, 100
straddles and, 87–89
Put options
during market declines, 54, 107–110,
239
plunging into stock market, contrary
theory and, 79–80
see also specific topics
Put option writing
grand master plan and, 268
longer term puts, 151
naked puts, 126
naked put writing, 147–151
shorter term puts, 151
and writing expiring put options,
135–136
R
Ratio hedge, 281–282
Rationality, 10
Reading
Beat the Dealer (Thorp, Edward), 281
Beat the Market (Thorp, Edward), 281
Conquer the Crash (Prechter, Robert
R., Jr.), 108
Market Wizards (Schwager, Jack D.), 80
Option Player’s Advanced Guidebook,
The (Trester, Kenneth R.), 173
Options as a Strategic Investment
(MacMillan, Larry), 7
Option Strategist, The (MacMillan,
Larry), 262
Recession bottom, 21
Resistance
charts and, 39
strategies and, 39
Risk
analyzing option position and, 83–84
contrary theory and, 79–80
of covered call writing, 139–140,
143–146
debit Leaps® spread and, 289
diagonal spreads and, 283–286
futures contracts, 45
generally, 9
of naked writing, 9, 125–126, 195–196
of option writing, 123–124
patience and, 91
plunging into stock market, 79–80
proper planning and, 263–264
ratio hedge and, 281–282
reduction. see Risk reduction
straddles and, 87–89
unrealistic expectations and, 78
Risk reduction
aggressive writing with limited risk,
275–277
by buying options, 13–14
of covered call writing, 139–140,
143–146
grand master plan and, 268
index credit spreads and, 276–277
of naked writing, 126, 195–196
option spreads and, 195–196
ratio hedge and, 281–282
spreads and, 195–196
surprise volatility and, 253–254,
275–276
through option trading, 4–5
Risk-reward picture
AI programs for, 189–192
edge advantage of, 291
option spreads and, 195–196
proper planning and, 263–264
ratio hedge and, 281–282
Rumor, “buy on,” 40
S
Scaling, 75–76
straddles and, 89
Scanning programs, 177–178, 257–258
Seasonal tendencies, 47–49
diversification and, 102
“Sell in May,” 47–49
Sell price. see Asked price (sell price)
Short positions, 48
Short term moves, 19
Simulators
debit Leaps® spread and, 288–289
implied volatility and, 167, 260
index credit spreads and, 276
profit probability and, 172–174, 185
Situational analysis, 179–180
Slippage
option spreads and, 197–198, 201
pocketing, 221–222
reducing, 217–218
Software programs
AI programs, 189–192
for option analysis, 159–160, 165–167,
172–174, 177–178, 185, 187–192,
257–258
profit probability simulators, 172–174,
185
scanning programs, 177–178, 257–258
selecting, 187–188
S&P 100 Index (OEX), 54
Spreads
Leaps® spreads, 268
option buying and, 195–196
option writing and, 195–196
to reduce option purchase cost,
207–208
spread orders, 227–230
spread prices, 227–228
see also Option spreads
Stock market
buy on dips, 291
group behavior and, 35–37
institutional influence and, 94–95
plunging into, contrary theory and,
79–80
psychology and, 35–36
recession bottom and, 21
reversion back to the mean, 27–28
sell on rallies, 291
see also Specific topics; Markets
Stock market crashes
naked writing and, 125
plunging into stock market, contrary
theory and, 79–80
seasonal tendencies and, 47–49
Stock options
buying, rules of the road, 274
price limits, 58
tutorial, 295–309
Stock prices
Baysian Analysis and, 181–185
covered call writing and, 145–146
historical volatility, 163–164, 167, 260
institutional influence and, 94–95,
99–100
stop-loss price, 59, 69–70
surprise volatility and, 93–95, 97,
253–254, 271
Stocks
60% rule, 52, 260
covered call writing and, 145–146
debit spreads for, designing rules for,
209–210
grand master plan and, 268
group behavior and, 35–37
naked put writing and, 147–151
predicting prices of, 20
psychology and, 35
put option buying and, 99–100
randomness of markets and, 20
risks generally, 3–4
seasonal tendencies and, 47–49
“sell in May,” 47–49
surprise volatility and, 97, 271
surrogates for, 288
technical charts and, 39–41
true value of, 155–156
tutorial, 295–309
see also [aaa}specific topics; Predicting
the markets
Stop-losses
covered call writing and, 140, 143–144
debit Leaps® spread and, 289
diagonal spreads and, 283–286
goals for, 39, 172–174, 185
index credit spreads and, 276, 279–280
naked writing and, 127–128, 247–249
option writing and, 137, 247–249
Profit Box and, 86
for profit taking, 69–70
stop-loss orders, 247–249
stop-loss price, 59–60
straddles and, 89
trailing stop-loss, 248, 289
uses of, 247–249
Stop-loss orders, 247–249
Straddles. see Option spreads
Straps. see Option spreads
Strategies
60% rule, 52, 260
bullish strategies, 54
for covered call writing, 145–146
delta neutral strategies, avoiding, 203
designing, criteria, 39, 289, 291
homework, importance of, 15–16
keeping simple, 203
for losses, 205
for naked put writing, 149–151
for option spreads, 203, 205
option strategies, 15–16, 20–21, 52, 84,
260, 281–282
for option trading, 205
for profit, long term, 156
proper planning and, 263–264
randomness and, 20–21
ratio hedge, 281–282
repair strategies, avoiding, 205
for resistance, 39
worth determination and, 84
Strike price
cheap options and, 71, 73
covered call writing and, 140, 143–144
for expiring options, 116
for financial instruments, 112
high-priced options and, 57
naked writing and, 128–129
straddles and, 87–89
for structured products, 112
undervalued options and, 73
vertical spreads and, 207–208
Stripes. see Option spreads
Structured products, 111–113
Subjective probabilities, 182–183
Sunk costs, 245–246
Supply and demand
charts as pictures of, 39
laws of, 43–45
Support
charts and, 39
strategies and, 39
Surprise volatility, 93–95, 97, 105, 115
cheap options and, 271–272
naked option writing and, 136, 148,
275–276
option writing and, 133–134, 136,
253–254, 275–276
Surrogates, 288
Systems, luck and, 31
T
Tax-loss selling, 47–48
Technical charts, 39–41
Track record, 251
Trade executions
internet trading advantage, 214
testing the waters, 223–224
see also Executions
Trading options. see Option trading
Trading ranges, breakouts and, 39
Trailing stop-loss, 248
debit Leaps® spread and, 289
Trends
chaos theory and, 21
charts and, 39
index credit spreads and, 277
seasonal tendencies, 47–49
Tutorial, 295–309
U
Undervalued options
best plays, scanning programs for,
177–178, 257–258
cheap options and, 272
edge advantage of, 291
home run options and, 65–67
identifying, 61–62
last month before expiration, and,
73–74
time as asset, 71–72
Unexpected, preparing for, 253–254
V
Vertical spread. see Option spreads
VIX. see CBOE Market Volatility Index
(VIX)
VNX. see Nasdaq Volatility Index (VNX)
Volatility
CBOE Market Volatility Index (VIX),
36–37, 54
charts and, 39–41
cheap options and, 272
historical volatility, 163–164, 167, 260
implied volatility, 165–167, 207–208,
260, 272
Nasdaq Volatility Index (VNX), 54
and panic, 54
reversion back to the mean, and, 28
surprise volatility, 93–95, 97, 105, 115,
133–134, 136, 148, 253–254,
271–272, 275–276
W
Warrants, 281
Web-based scanning programs, 177–178,
256–257
Winning streaks, 24–25
Writing options. see Option writing
Please Send Me Information on the
Following Products and Services:
Option Market Letter: _______ Put & Call Tactician
Books: _______ The Complete Option Player
_______ The Option Player’s Advanced
Guidebook
Option Software &
Other Products: _______ Computer Software—Option
Trading
_______ Options Home Study Course
_______ How to Buy Stock and
Commodity Options—Video Tape
Option Seminars: _______ Option Trading Camps
_______ Option Trading Camp Videos
NAME ________________________________________________
MAILING ADDRESS ____________________________________
CITY, STATE & ZIP CODE________________________________
Mail To:
Institute for Options Research, Inc.
P.O. Box 6629 Lake Tahoe, NV 89449
or call: 1-800-407-2422
Purchasers of THE COMPLETE OPTION PLAYER are eligible to
receive a FREE copy of one issue of Kenneth R. Trester’s Options
Newsletter. To receive your FREE copy, simply fill in and mail
this coupon.
NAME ________________________________________________
MAILING ADDRESS ____________________________________
CITY, STATE & ZIP CODE________________________________
Return To:
Institute for Options Research, Inc.
P.O. Box 6629 Lake Tahoe, NV 89449
Internet: options-inc.com
Kenneth R. Trester is recognized as a leading international
options advisor. He is a popular speaker at financial conventions
and options trading seminars and has even given seminars in
Russia. Through his market letters, he has originated many of
the options strategies that are industry standards today.
Ken Trester is the author of The Complete Option Player,
now in its 4th edition. It was followed by The Option Players Advanced
Guidebook. Other works include a comprehensive options
home study course, Secrets to Stock Option Success, and
software for options trading, Option Master®, The Push-Button
Option Trader and The Push-Button Option Writer. He has written
numerous articles that have been quoted in such publications
as Barrons and is a contributing author to the
Encyclopedia of Stock Market Techniques. Ken Trester also coauthored
the book, Complete Business BASIC Programming. Besides,
Ken Trester is the editor of The Put & Call Tactician
Advisory Service.
Ken Trester has been trading options since the options exchanges
first opened in 1973. His background combines systems
analysis, operations research and investment management. He
has been the president of a management consulting firm and an
Assistant Professor of Management at the California State University,
Fresno and in the Computer Science Department at
Golden West College. He holds a B.S. and M.B.A. from Utah State
University and has done post graduate work at the University of
Oregon.
60% rule, 52, 260
A
Advisory services, 261–262
AI (Artificial Intelligence) programs,
189–192
Alligator spreads. see Option spreads
Analysis. see Option analysis
Asked price (sell price), 217–218
buying at, 228
limit order and, 224
market makers and, 221
market order and, 224
stop-loss orders and, 248
Asset allocation plan, 267–268
B
Bargain options
identifying, 61–62
see also Cheap options
Baysian Analysis, 181–185
Baysian Decision Rule, 183–184
Beat the Dealer (Thorp, Edward), 281
Beat the Market (Thorp, Edward), 281
Bid price (buy price), 217–218
market makers and, 221
selling at, 228
stop-loss orders and, 248
Black and Scholes model, 156
Bond funds, 267–268
Breakouts, 39
Brokerage firms, online, 218
Bullish strategies, 54
Butterfly spreads. see Option spreads
Buying Leaps®, 268
Buying options. see Option buying
Buy price. see Bid price (buy price)
C
Calendar spread. see Option spreads
Call options
buying, 87–89, 99–100, 115–116
theoretical performance of, 5
writing naked calls, 126
see also [aaa}specific topics
Cash, 267
CBOE Market Volatility Index (VIX),
36–37, 54
Chaos theory, 21
and market declines, 108
and surprise events, 94
and surprise volatility, 115, 136, 271
Charts, 39–41
cheap options and, 272
as predictors of the future, 40–41
for stock near or at top, 53
Cheap options
advantages of, 271–272
grand master plan and, 268
home run options and, 65–67
last month before expiration, and,
73–74
naked writing and, 128
time as asset, 71–72
Collar, 143–144
Commissions, reducing, 217–218
Commodities
60% rule, 52, 260
debit spreads for, designing rules for,
209–210
options, 43, 209–210, 274
seasonal tendencies and, 48–49
supply and demand, effect on, 43
Computers and prediction, 33–34, 51,
88–89
for option analysis, 159–160, 165–167,
172–174, 177–178, 185, 187–192
Conquer the Crash (Prechter, Robert R.,
Jr.), 108
Contrary investors, 35–37
Contrary theory, 79
Costs
reduction through spreads, 207–208
slippage and, 197–198, 201, 217–218,
221–222
sunk costs, 245–246
Covered call writing
disadvantages of, 143–144
grand master plan and, 268
strategies, 145–146
when to use, 139–140
Crashes. see Stock market crashes
Credit spreads. see Option spreads
D
Debit Leaps® spread, 287–289
Debit spreads. see Option spreads
Delta (“bang for your buck”)
delta neutral strategies, avoiding, 203,
260
option analysis and, 169–170, 260
Demand. see Supply and demand
Diversification, 101–102
Dollar averaging, 52
E
Education
internet resources and, 256–257
requirements for, 7–8
Ego, 9, 235–236
Emotions, controlling, 235–236
End of the month phenomenon, 48
Euphoria, 35–37
Events
contrary theory and, 79–80
and surprise volatility, 93–95, 253–254
Executions
of spread orders, 228
see also Trade executions
Exit points, 247
Expiring options, 115–116
diagonal spreads and, 283–286
index credit spreads and, 279–280
F
Fear, 35–37
Feelings, 182–183
Financial instruments, 111–113
Forecasting techniques, 34
Fundamentals, 40–41
Fun money, 241–242
grand master plan and, 268
Futures
buying, 147–151
contracts, 44–45
debit Leaps® spread and, 289
options, 58
prices, 59, 69–70, 163–164, 167, 260
seasonal tendencies and, 48–49
surrogates for, 288
technical charts and, 39–41
tutorial, 295–309
see also Predicting the markets
G
Game plan
grand master plan and, 267–268
proper planning and, 263–264
Genetic algorithms, 34
Grand master plan, 267–268
Greed, 9
Group behavior, 35–37
Gurus, 31–32, 261
H
Hedging, ratio hedges and, 281–282
Hesitation, 70
Highs
supply and demand, effect on, 44
upward trend, likelihood of, 39–41
Historical volatility, 163–164, 167, 260
Hold period, 72
Holidays, 48
Home run options, 65–67
Hot seat concept, 133–134
I
Implied volatility
cheap options and, 272
debit spreads and, 207–208
option analysis and, 165–167, 260, 272
Indexes
CBOE Market Volatility Index (VIX),
36–37, 54
debit spreads for, designing rules for,
209–210
expiring options, buying, 115–116
index credit spread and, 275–277,
279–280
index funds, investment in, 19–20, 52
investment in, 52
Nasdaq Volatility Index (VNX), 54
predicting prices of, 20
S&P 100 Index (OEX), 54
writing index options on, 275
see also Predicting the markets
Inertia, 105
countering, 86
option buying and, 59–60
Institutional influence, 94–95
put option buying and, 99–100
Insurance
financial instruments as, 111–113
grand master plan and, 268
put option buying as, 107–110
structured products as, 111–113
Internet trading
advantages of, 213–214
and controlling order, 224
emotions and, 235–236
internet resources and, 256–257
online brokerage firms and, 218
spreading tactics and, 229–230
trading office as war room, 235–236
web-based scanning programs and,
177–178
Intuitive feelings, 182–183
Investment
60% rule, 51–52, 260
see also [aaa}specific topics
L
Leaps®, 281
Leaps® spreads, 268
Limit order, 224
limit spread orders, 227, 230
Limit price, 221–222
testing the waters, 223–224
Long term options, 281–282
Losing streaks, 24–25
diversification and, 102
fun money and, 241–242
Losses
and buying expiring options, 115–116
cheap options and, 272
cutting, quickness and, 105
inertia and cutting losses, 86
losing control of spread and, 229
losing streaks, 24–25, 102, 241–242
option writing and, 138
ratio hedge and, 281–282
repair strategies and, avoiding, 205
stop-losses and, 247–249
sunk costs and, 245–246
taking, 235–236, 243
Lows
downward trend, likelihood of, 39–41
supply and demand, effect on, 44
Luck, 31
M
Magic Pyramid, 267–268
Market declines
getting out when, 239
index credit spreads and, 276–277
put option buying, insurance against,
107–110
Market makers
acting like, 221–222
and limiting size, 231–232
Market order, 224
Markets
60% rule, 52, 260
bottom, determining, 54
CBOE Market Volatility Index (VIX)
and, 36–37
declines, 107–110, 239, 276–277
efficiency of, 20–21
extremes, procedure when, 35–37
profit probability and, 167, 171–174,
181–185, 260
randomness of, 20–21, 39, 51–52
regression back to the mean, 27–28
surprise volatility and, 93–95, 253–254,
271, 275–276
see also [aaa}specific topics; Predicting
the markets; Stock market
Market Wizards (Schwager, Jack D.), 80
Maverick investors, 35–37
Mutual funds
grand master plan and, 268
portfolio insurance, 107–110
reversion back to the mean, 28
underperformance of, 19–20
N
Naked writing
aggressive writing with limited risk,
275–277
defensive steps for, 137–138
distance and, 129
exiting, timing of, 133–134
of expiring put options, 135–136
grand master plan and, 268
as high risk trade, 9
naked put writing, 147–148
win-win strategy for, 149–151
of out-of-the money options, 128–129
probability and, 127–129
of puts and calls, 126
ratio hedge and, 281–282
risk of, 9, 125–126
risk removal through spreads, 195
situational analysis and, 179–180
spreads and, 195–196
stop-losses and, 247–249
surprise volatility and, 134, 136, 148,
275–276
time and, 129
Nasdaq Volatility Index (VNX), 54
Neural nets, 34
News
and predicting the markets, 40–41
“sell on,” 40
situational analysis and, 179–180
surprise volatility and, 93–95, 253–254
O
OEX. see S&P 100 Index (OEX)
Online trading. see Internet trading
Option advisory services, 261–262
Option analysis
analyzing option position, 83–84
Baysian Analysis and, 181–185
cheap options and, 272
computer programs for, 159–160
and delta (“bang for your buck”),
169–170, 260
fair value of option, 163–167, 260, 272
information overload, 259–260
mathematical measurement models for,
155–156
paralysis, avoiding, 259–260
Percent to Double calculation tool for,
profit probability, 167, 171–174,
181–185, 260
scanning programs for, 177–178,
257–258
situational analysis and, 179–180
software programs for, 159–160,
165–167, 172–174, 177–178, 185,
187–192, 257–258
volatility and, 163–164
Option buying
advantages of, 57, 97
AI programs for, 189–192
analyzing option position, 83–84
bargain options, 61–62
buying expiring options, 115–116
buy on dips, 291
call option buying, 99–100, 115–116
cheap options, 58, 60–62, 271–272
cost reduction through spreads,
207–208
of covered call writing, 140
debit Leaps® spread and, 289
debit spreads and, 207–208
and delta (“bang for your buck”),
169–170, 260
diversification in over time, 101–102
fun money and, 241–242
high-price options, effect, 57–59
hold period, 72
home run options, 65–67
hot seat concept and, 134
hype and, 77–78
index options, 115–116
inertia and, 59–60, 105
last month before expiration, and,
73–74
limit price and, 221–222
low-price options, effect, 58, 60
odds of winning, 23–25
patience and, 77
Percent to Double calculation tool for,
171
Profit Box and, 85–86
profit probability, 167, 171–174,
181–185, 260
proper planning and, 263–264
put option buying, 36, 99–100, 107–110
risk reduction by, 13–14
rules of the road, 273–274
spreads and. see Option spreads
stop-losses and, 247–249
straddles and, 87–89
sunk costs and, 245–246
surprise volatility and, 93–95, 97, 105,
253–254, 271
time as asset, 71–72
time as enemy, 71
undervalued options, identifying, 61–62
unrealistic expectations and, 77–78
worth determination, 84
Option game
tutorial, 295–309
see also [aaa}specific topics
Option Player’s Advanced Guidebook,
The (Trester, Kenneth R.), 173
Option plays
aggressive writing with limited risk,
275–277
best plays, scanning programs for,
177–178, 257–258
cheap options, 271–272
diagonal spreads, 283–286
fun money and, 241–242
grand master plan and, 268
limiting size, 231–232
proper planning and, 263–264
ratio hedges, 281–282
rules of the road, 273–274
situational analysis and, 179–180
Option positions
analyzing, 83–84
best plays, scanning programs for,
177–178, 257–258
diversification in over time, 101–102
last month before expiration, and,
131–132
Option prices
analyzing option position and, 83–84
asked price (sell price), 217–218, 221,
224, 228, 248
bid price (buy price), 217–218, 221,
228, 248
call options, 100
cheap options and, 272
and delta (“bang for your buck”), 260,
169–170
flexibility and, 225–226
historical volatility, 163–164, 167, 260
implied volatility, 165–167, 207–208,
260, 272
during market declines, 54, 239
naked writing and, 128–129
option buying, 58, 60, 221–222
option buying and, 57–59
paying more, advantage of, 225–226
as predictors of the future, 41
Profit Box and, 85–86
put options, 100
spread prices, 227–228
stop-loss orders and, 248
sunk costs and, 245–246
surprise volatility and, 93–95, 97,
253–254, 271
testing the waters, 223–224
volatility of, 163–167, 207–208, 260,
272
worth determination and, 84
Options
call options, 5, 87–89, 99–100,
115–116, 126
cheap options, 65–67, 71–74, 128, 268,
271–272
depreciation of, 59, 71, 73
hold period, 72
long term options, 281–282
markets, statistical advantage in, 178
put options. see Put options
theoretical performance of, 4–5
true value of, 155–156
see also [aaa}specific topics
Options as a Strategic Investment
(MacMillan, Larry), 7
Option spreads
advantages of, 195–196
alligator spreads, avoiding, 201
butterfly spreads, avoiding, 197–198,
201
calendar spread, 207–208, 283–286
complex spreads, avoiding, 201
credit spreads, 195, 227–228, 247–249,
268
debit Leaps® spread, 287–289
debit spreads, 195, 207–210, 227–228,
268
delta neutral strategies, avoiding, 203
diagonal spreads, 268, 283–286
grand master plan and, 268
index credit spreads, 275–277, 279–280
Leaps® spreads, 268
long term option debit spread, 287–289
losses, taking, 243
ratio spreads, 268, 282
repair strategies, avoiding, 205
spread positions, 227–230
straddles, 87–89, 195
straps, 195
stripes, 195
time spreads, 283–286
trades, 197–198, 201
vertical spread, 207–208
see also Spreads
Option strategies
60% rule, 52, 260
homework, importance of, 15–16
randomness and, 20–21
ratio hedge, 281–282
worth determination and, 84
Option Strategist, The (MacMillan,
Larry), 262
Option trading
advantages of, 3–5, 21, 34
analysis for. see Option analysis
education requirements for, 7–8
emotions, controlling, 235–236
fun money and, 241–242
homework prior to, 15–16
inertia and, 105
limiting size, 231–232
losing streaks, 24–25
minimizing trading, 197–198, 218
passing on the trade
option analysis and, 160
patience and, 91
playing on paper, 9–10
proper planning and, 263–264
repair strategies, avoiding, 205
risk reduction through, 4–5
track record and, 251
trading office as war room, 235–236
see also [aaa}specific topics; Internet
trading; Option buying; Trade
executions
Option writing
advantages of, 121
aggressive writing with limited risk,
275–277
buying back the option, 120
closing out position and obligation, 120
as consistent income source, 120
covered call writing, 139–140, 143–146
debit Leaps® spread and, 289
debit spreads and, 207–208
defensive steps for, 137–138
and delta (“bang for your buck”),
169–170, 260
exiting, timing of, 133–134
hot seat concept and, 133–134
last month before expiration, and,
73–74, 131–132
longer term puts, 151
losses, taking, 243
naked writing. see Naked writing
of out-of-the-money options, 133–134
profit probability, 167, 171–174,
181–185, 260
and risk, 9, 123–126
as selling options, 120
sell on rallies, 291
shorter term puts, 151
short term options, 123
spreads and. see Option spreads
stop-losses and, 247–249
surprise volatility and, 133–134,
253–254, 275–276
taking and paying off the bet, 119–120
time and, 129, 131–132
winning at, 121, 123–124
and writing expiring put options,
135–136
Orders
limiting size, 231–232
limit orders, 224
limit spread orders, 227, 230
market orders, 224
stop-loss orders, 247–249
Overvalued options
best plays, scanning programs for,
177–178, 257–258, 272
edge advantage of, 291
ratio hedge and, 281–282
P
Panic, 54
Paper trading, 9–10
Patience, 91
and buying expiring options, 115–116
and naked writing of expiring put
options, 136
Percent to Double calculation tool, 171
Performance
managing portfolio and, 15
proper planning and, 263–264
theoretical performance, 4–5, 77–78
track record and, 251
Portfolio
call option buying and, 99–100
diversification in over time, 101–102
grand master plan and, 267–268
insurance, 107–113
managing, importance of, 15
put option buying and, 99–100
scaling and, 75–76
Positions
diversification in over time, 101–102
last month before expiration, and,
73–74
scaling into, out of, 75–76
starting with small positions, 14
Predicting the markets
60% rule, 52, 260
computers and, 33–34, 51
extremes, procedure when, 35–37
forecasting techniques, 34
genetic algorithms and, 34
gurus and, 31–32
methods, 33–34
neural nets and, 34
news and, 40–41
odds of winning, 23–24
option prices as predictors of the
future, 41
randomness and, 19–21
regression back to the mean, 27–28
seasonal tendencies and, 47–49
success and, 31–32
using charts, 39–41
Probability
Baysian Analysis and, 181–185
cheap options and, 272
debit Leaps® spread and, 287–289
index credit spreads and, 276
naked writing and, 127–129
ratio hedges and, 281–282
subjective probabilities, 182–183
see also Profit probability
Profit
cheap options and, 272
debit Leaps® spread and, 287–289
diagonal spreads and, 283–286
fast profits, option writing and,
123–124
goals, 39, 172–174, 185
hot seat concept and, 134
implied volatility and, 167, 260, 272
index credit spreads and, 277
inertia and, 86
letting ride, 67
long term profit strategies, 156
patience and, 77, 91
probability. see Profit probability
Profit Box and, 85–86
proper planning and, 264
ratio hedge and, 281–282
scaling into, out of options, and, 75–76
for stock near or at top, 53
straddles and, 87–89
taking, 67, 69–70, 105, 109–110,
248–249
trailing stop-loss and, 248–249
unrealistic expectations of, 77–78
Profit Box, 85–86
Profit probability, 155, 260
Baysian Analysis and, 182–183
option analysis for, 167, 171–174,
181–185, 260
of option buying, 167, 171–174,
181–185, 260
option spreads and, 195–196
of profit, 155, 260
simulators, 172–174, 185
simulators and, 172–174, 185
subjective probabilities and, 182–183
Psychology, 35–36
Put option buying, 36
generally, 99–100
as portfolio insurance, 107–110
purpose, 100
straddles and, 87–89
Put options
during market declines, 54, 107–110,
239
plunging into stock market, contrary
theory and, 79–80
see also specific topics
Put option writing
grand master plan and, 268
longer term puts, 151
naked puts, 126
naked put writing, 147–151
shorter term puts, 151
and writing expiring put options,
135–136
R
Ratio hedge, 281–282
Rationality, 10
Reading
Beat the Dealer (Thorp, Edward), 281
Beat the Market (Thorp, Edward), 281
Conquer the Crash (Prechter, Robert
R., Jr.), 108
Market Wizards (Schwager, Jack D.), 80
Option Player’s Advanced Guidebook,
The (Trester, Kenneth R.), 173
Options as a Strategic Investment
(MacMillan, Larry), 7
Option Strategist, The (MacMillan,
Larry), 262
Recession bottom, 21
Resistance
charts and, 39
strategies and, 39
Risk
analyzing option position and, 83–84
contrary theory and, 79–80
of covered call writing, 139–140,
143–146
debit Leaps® spread and, 289
diagonal spreads and, 283–286
futures contracts, 45
generally, 9
of naked writing, 9, 125–126, 195–196
of option writing, 123–124
patience and, 91
plunging into stock market, 79–80
proper planning and, 263–264
ratio hedge and, 281–282
reduction. see Risk reduction
straddles and, 87–89
unrealistic expectations and, 78
Risk reduction
aggressive writing with limited risk,
275–277
by buying options, 13–14
of covered call writing, 139–140,
143–146
grand master plan and, 268
index credit spreads and, 276–277
of naked writing, 126, 195–196
option spreads and, 195–196
ratio hedge and, 281–282
spreads and, 195–196
surprise volatility and, 253–254,
275–276
through option trading, 4–5
Risk-reward picture
AI programs for, 189–192
edge advantage of, 291
option spreads and, 195–196
proper planning and, 263–264
ratio hedge and, 281–282
Rumor, “buy on,” 40
S
Scaling, 75–76
straddles and, 89
Scanning programs, 177–178, 257–258
Seasonal tendencies, 47–49
diversification and, 102
“Sell in May,” 47–49
Sell price. see Asked price (sell price)
Short positions, 48
Short term moves, 19
Simulators
debit Leaps® spread and, 288–289
implied volatility and, 167, 260
index credit spreads and, 276
profit probability and, 172–174, 185
Situational analysis, 179–180
Slippage
option spreads and, 197–198, 201
pocketing, 221–222
reducing, 217–218
Software programs
AI programs, 189–192
for option analysis, 159–160, 165–167,
172–174, 177–178, 185, 187–192,
257–258
profit probability simulators, 172–174,
185
scanning programs, 177–178, 257–258
selecting, 187–188
S&P 100 Index (OEX), 54
Spreads
Leaps® spreads, 268
option buying and, 195–196
option writing and, 195–196
to reduce option purchase cost,
207–208
spread orders, 227–230
spread prices, 227–228
see also Option spreads
Stock market
buy on dips, 291
group behavior and, 35–37
institutional influence and, 94–95
plunging into, contrary theory and,
79–80
psychology and, 35–36
recession bottom and, 21
reversion back to the mean, 27–28
sell on rallies, 291
see also Specific topics; Markets
Stock market crashes
naked writing and, 125
plunging into stock market, contrary
theory and, 79–80
seasonal tendencies and, 47–49
Stock options
buying, rules of the road, 274
price limits, 58
tutorial, 295–309
Stock prices
Baysian Analysis and, 181–185
covered call writing and, 145–146
historical volatility, 163–164, 167, 260
institutional influence and, 94–95,
99–100
stop-loss price, 59, 69–70
surprise volatility and, 93–95, 97,
253–254, 271
Stocks
60% rule, 52, 260
covered call writing and, 145–146
debit spreads for, designing rules for,
209–210
grand master plan and, 268
group behavior and, 35–37
naked put writing and, 147–151
predicting prices of, 20
psychology and, 35
put option buying and, 99–100
randomness of markets and, 20
risks generally, 3–4
seasonal tendencies and, 47–49
“sell in May,” 47–49
surprise volatility and, 97, 271
surrogates for, 288
technical charts and, 39–41
true value of, 155–156
tutorial, 295–309
see also [aaa}specific topics; Predicting
the markets
Stop-losses
covered call writing and, 140, 143–144
debit Leaps® spread and, 289
diagonal spreads and, 283–286
goals for, 39, 172–174, 185
index credit spreads and, 276, 279–280
naked writing and, 127–128, 247–249
option writing and, 137, 247–249
Profit Box and, 86
for profit taking, 69–70
stop-loss orders, 247–249
stop-loss price, 59–60
straddles and, 89
trailing stop-loss, 248, 289
uses of, 247–249
Stop-loss orders, 247–249
Straddles. see Option spreads
Straps. see Option spreads
Strategies
60% rule, 52, 260
bullish strategies, 54
for covered call writing, 145–146
delta neutral strategies, avoiding, 203
designing, criteria, 39, 289, 291
homework, importance of, 15–16
keeping simple, 203
for losses, 205
for naked put writing, 149–151
for option spreads, 203, 205
option strategies, 15–16, 20–21, 52, 84,
260, 281–282
for option trading, 205
for profit, long term, 156
proper planning and, 263–264
randomness and, 20–21
ratio hedge, 281–282
repair strategies, avoiding, 205
for resistance, 39
worth determination and, 84
Strike price
cheap options and, 71, 73
covered call writing and, 140, 143–144
for expiring options, 116
for financial instruments, 112
high-priced options and, 57
naked writing and, 128–129
straddles and, 87–89
for structured products, 112
undervalued options and, 73
vertical spreads and, 207–208
Stripes. see Option spreads
Structured products, 111–113
Subjective probabilities, 182–183
Sunk costs, 245–246
Supply and demand
charts as pictures of, 39
laws of, 43–45
Support
charts and, 39
strategies and, 39
Surprise volatility, 93–95, 97, 105, 115
cheap options and, 271–272
naked option writing and, 136, 148,
275–276
option writing and, 133–134, 136,
253–254, 275–276
Surrogates, 288
Systems, luck and, 31
T
Tax-loss selling, 47–48
Technical charts, 39–41
Track record, 251
Trade executions
internet trading advantage, 214
testing the waters, 223–224
see also Executions
Trading options. see Option trading
Trading ranges, breakouts and, 39
Trailing stop-loss, 248
debit Leaps® spread and, 289
Trends
chaos theory and, 21
charts and, 39
index credit spreads and, 277
seasonal tendencies, 47–49
Tutorial, 295–309
U
Undervalued options
best plays, scanning programs for,
177–178, 257–258
cheap options and, 272
edge advantage of, 291
home run options and, 65–67
identifying, 61–62
last month before expiration, and,
73–74
time as asset, 71–72
Unexpected, preparing for, 253–254
V
Vertical spread. see Option spreads
VIX. see CBOE Market Volatility Index
(VIX)
VNX. see Nasdaq Volatility Index (VNX)
Volatility
CBOE Market Volatility Index (VIX),
36–37, 54
charts and, 39–41
cheap options and, 272
historical volatility, 163–164, 167, 260
implied volatility, 165–167, 207–208,
260, 272
Nasdaq Volatility Index (VNX), 54
and panic, 54
reversion back to the mean, and, 28
surprise volatility, 93–95, 97, 105, 115,
133–134, 136, 148, 253–254,
271–272, 275–276
W
Warrants, 281
Web-based scanning programs, 177–178,
256–257
Winning streaks, 24–25
Writing options. see Option writing
Please Send Me Information on the
Following Products and Services:
Option Market Letter: _______ Put & Call Tactician
Books: _______ The Complete Option Player
_______ The Option Player’s Advanced
Guidebook
Option Software &
Other Products: _______ Computer Software—Option
Trading
_______ Options Home Study Course
_______ How to Buy Stock and
Commodity Options—Video Tape
Option Seminars: _______ Option Trading Camps
_______ Option Trading Camp Videos
NAME ________________________________________________
MAILING ADDRESS ____________________________________
CITY, STATE & ZIP CODE________________________________
Mail To:
Institute for Options Research, Inc.
P.O. Box 6629 Lake Tahoe, NV 89449
or call: 1-800-407-2422
Purchasers of THE COMPLETE OPTION PLAYER are eligible to
receive a FREE copy of one issue of Kenneth R. Trester’s Options
Newsletter. To receive your FREE copy, simply fill in and mail
this coupon.
NAME ________________________________________________
MAILING ADDRESS ____________________________________
CITY, STATE & ZIP CODE________________________________
Return To:
Institute for Options Research, Inc.
P.O. Box 6629 Lake Tahoe, NV 89449
Internet: options-inc.com