Detailed Description

Different strategies, different styles, different risk profiles: The following set of collection of 11 past Options Trader articles covers a wide range of options trading strategies ranging from simple speculative and hedging positions to sophisticated spread techniques.

This collection is 30% off the regular price. Price shown is the discounted price.

ARTICLE 1: Hedging risk with collar trades by Jim Graham (Options Trader. April 2005)

Summary/excerpt: Individual stocks can be hurt by company or industry specific news even when the overall market is rising. That’s why it is important to consider a trading plan that incorporates hedging techniques to limit the damage from sudden price drops. Collar trades can help reduce the risk of a stock or futures position — and lock in gains without wiping out additional profits.

ARTICLE 2: Reducing risk with vertical spreads by James Bittman (Options Trader. June 2005)

Summary/excerpt: Trading options can be frustrating because the behavior of option prices is sometimes counterintuitive. For example, assume a company’s earnings announcement met (or exceeded) expectations and its stock price rose from $68.50 to $71.25. The price of a call option with a strike price of $70, however, declined from $4.80 to $4.00. What happened?

Implied volatility, that’s what. Changes in implied volatility can affect an options price more than changes in its underlying stock price. We’ll explain how a drop in implied volatility caused the 70 call to drop despite a rallying stock price and show how a vertical spread (buying a call and selling another call with a higher strike price) can mitigate the effect of implied volatility.

ARTICLE 3: The conservative short strangle by Michael C. Thomsett (Options Trader. Aug. 2005)

Summary/excerpt: Selling options always contains a certain amount of risk, but covering your shorts by owning the underlying stock can reduce exercise risk and boost income. Discover how long a position can enhance the profitability of a short strangle.

ARTICLE 4: The ratio write: Covered call with a twist by Michael C. Thomsett (Options Trader. Nov. 2005)

Summary/excerpt: Selling more calls than your underlying position can cover provides more premium than a standard covered call, but it also creates more risk. However, adding a higher–strike long call offers the best of both worlds – more premium without increased risk.

Sometimes a slight variation on a basic trading approach can offer much broader profit opportunities. A ratio write introduces a small twist to the covered call strategy: Instead of selling the exact number of calls to match your underlying investment, sell one or more additional calls, which, in return for increasing the strategy’s upside risk, will provide more premium.

ARTICLE 5: The synthetic straddle by Tony Ciccone (Options Trader. Dec. 2005)

Summary/excerpt: If you believe a market might move dramatically up or down or implied volatility will rise, a long straddle (long call and put options with the same strike price and expiration month) can be a potentially profitable trade.

However, the long straddles major drawback is time decay, which constantly erodes the options value. If the underlying doesn’t move sharply or the implied volatility doesn’t increase, the long straddle will eventually expire worthless.

One alternative version of this trade is the synthetic straddle, which is created by buying the underlying along with protective puts. Although a synthetic straddle requires more capital than a traditional one, both positions have nearly identical risk profiles.

ARTICLE 6: The iron condor by Marty Kearney (Options Trader. March 2006)

Creating this imposing–sounding strategy isn’t as complex as it seems — simply combine put and call credit spreads. The result is a market–neutral strategy that profits from the time decay on short options while providing protection with long options.

ARTICLE 7: Two spreads are better than one by Tony Ciccone (Options Trader. April 2006)

Summary/excerpt: Calendar spreads profit from short option time decay, but only if the underlying trades near the strike price. An alternative strategy is to enter a double calendar, or diagonal, spread, which can boost the odds of success while minimizing exposure.

ARTICLE 8: Non–seasonal options trading by S.A. Johnston (Options Trader. May 2006)

Summary/excerpt: Traders often focus on seasonal tendencies, but Options Trader s can also profit if an underlying instrument tends not to move higher or lower during specific times of the year. Options allow you to capitalize on these situations.

ARTICLE 9: Ratio call spreads: Leverage profits and reduce risk by Philip Budwick (Options Trader. June 2006)

Summary/excerpt: Ratio call spreads can enhance an underlying position’s potential gains at no extra cost, or in many cases, for a net credit.

Assume you purchased a stock at $60 and had a price target of $70 over the next few months. To boost your potential profit and reduce risk, you could add a ratio call spread to the underlying position, consisting of a long call and multiple out–of–the–money (OTM) short calls.

Adding a ratio call spread can help you exit with a $10 profit even if the stock only climbs to $65.

ARTICLE 10: Trading synthetic spreads by Kevin Baldwin (Options Trader. July 2006)

Summary/excerpt: Adding options to an underlying position can transform your portfolio into virtually any type of options spread. Lean how to create synthetic positions to fit your outlook.

Suppose you’re becoming nervous about your long stock portfolio. Traditionally, a sophisticated investor might choose to hedge the stock portfolio to beta zero, mitigating the impact of stock index moves on their portfolio.

Another way to reduce risk is to create a synthetic position by adding options to an underlying position. Synthetic positions share the same reward–risk characteristics as other strategies but use different components, which lets you transform a stock or bond portfolio into any option spread position.

ARTICLE 11: A new twist with protective puts by Tom Gentile (Options Trader. July 2006)

Summary/excerpt: Traders are often reluctant to buy puts to protect stock positions, but this protection is much more attractive if you use a stocks dividend to pay for it. Find out how buying puts on high–dividend stocks can lower risk and increase a trades odds of success.

Purchased separately, these 11 articles would cost $49.50. Now you can buy them as a set for $34.65 — 30% off the combined regular price.