“Larry’s book is the bible of the options community. It has established the benchmark by which all other option books are compared – and none measure up.” McMillan’s expertise extends beyond writing, as he is also a sought-after speaker and educator in the field of options trading. The book covers various option types, spreads, and volatility, with practical examples. Options as a Strategic Investment is widely regarded as a comprehensive guide to options trading. These are risk measures that quantify the sensitivity of an option’s price to changes in underlying factors.
“The options world has a lot to offer investors and traders alike, but it can be dauntingly hard to understand. Since its original publication, Options as a Strategic Investment has answered many a question; and each succeeding edition has answered many more. It is the options reference in our office.” John Bollinger – CFA, CMT, President Bollinger Capital Management, Manhattan Beach, California Written especially for investors who have some familiarity with the option market, this comprehensive reference also shows you the concepts and applications of various option strategies—how they work, in which situations, and why; techniques for using index options and futures to protect one’s portfolio and improve one’s return; and the implications of the tax laws for option writers, including allowable long-term gains and losses. This allows investors to hedge their portfolios with index futures or options, even if they don’t own all the stocks in the index. Put spreads involve buying and selling put options with different strike prices or expiration dates. Call spreads involve buying and selling call options with different strike prices or expiration dates.
- Program trading involves the simultaneous buying or selling of a large number of stocks, often triggered by computer algorithms.
- “Larry has taken options education into the 21st century with this book. His insights into trading concepts will always stand the test of time. Keeping up with the latest information on options is mandatory and no one does it more masterfully than Larry.” Mark D. Cook – Professional Options Trader, Mark D. Cook Trading Instruction, East Sparta, Ohio
- Their longer lifespan makes them suitable for investors with a long-term outlook.
- Examples include bear spreads and calendar spreads.
- It is not designed to meet your personal financial situation – we are not investment advisors nor do we give personalized investment advice.
Arbitrage involves simultaneously buying and selling the same or equivalent securities in different markets to profit from price discrepancies. The arbitrage process serves a useful purpose in the listed options market, because it may provide a secondary market where one might not otherwise exist. LEAPS can be used in a variety of strategies, including speculative option buying, covered writing, and spreading. Buying put options in conjunction with owning common stock provides downside protection, limiting potential losses while still allowing for upside appreciation. These strategies can be used to limit risk, reduce costs, or target specific price ranges. Purchasing call options offers leverage, allowing investors to control a larger number of shares with a smaller capital outlay.
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LEAPS are merely long-term options. This strategy is particularly attractive for long-term investors seeking insurance against market downturns. This strategy involves selling a call option on a stock you already own, generating income from the premium received. Understanding these factors is crucial for evaluating an option’s potential and making informed trading decisions. These standardized terms, established by exchanges, facilitate trading and create a liquid secondary market. Volume reflects consolidated markets.
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A box spread combines a bull call spread and a bear put spread with the same strike prices. It’s a risk-free strategy, as the profit is locked in at the outset. Their longer lifespan makes them suitable for investors with a long-term outlook.
References to this book
Purchasing put options allows investors to profit from a decline in the price of an underlying stock. Check out our listicle on “The Best Options Trading Books,” which provides an array of resources for both beginners and advanced traders in the field of options trading. Options as a Strategic Investment by Lawrence G. McMillan is a comprehensive guide to understanding and implementing options trading strategies.
The purpose of this book is to provide the reader with that understanding of options. Index options and futures typically settle in cash, meaning that there is no physical delivery of the underlying securities. These are basic arbitrage techniques that exploit price differences between puts, calls, and the underlying stock.
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How does Options as a Strategic Investment by Lawrence G. McMillan describe put options and their strategic uses?
By writing a call option against stock, one always decreases the risk of owning the stock. Options are derivative securities, their value derived from the price fluctuations of the underlying stock. A stock option is the right to buy or sell a particular stock at a certain price for a limited period of time. So, does that mean you should avoid options entirely?
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Interested in exploring more resources on options trading? It explores a broad range of topics, from the basics of options contracts to complex trading strategies, making it an essential resource for anyone interested in trading options. Lawrence G. McMillan is a renowned expert in options trading. “Larry has taken options education into the 21st century with this book. His insights into trading concepts will always stand the test of time. Keeping up with the latest information on options is mandatory and no one does it more masterfully than Larry.” Mark D. Cook – Professional Options Trader, Mark D. Cook Trading Instruction, East Sparta, Ohio “Larry’s book is the bible of the options community. It has established the benchmark by which all other option books are compared – and none measure up.” Alex Jacobson – Vice President, International Securities Exchange, New York, New York
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This article will take a closer look at the pros and cons of this acclaimed book and delve into the key differences between its 4th and 5th editions. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. Past performance is not necessarily indicative of future results.Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. “The best one-stop source of understandable option information that you can act on immediately. Every serious investor should read this book.” Ken and Daria Dolan – Heard options as a strategic investment daily across America on the WOR radio network.
- It’s a risk-free strategy, as the profit is locked in at the outset.
- “One of the first gifts I received when I started working on a trading desk for an arb fund was your book Options As A Strategic Investment. It has been invaluable, you write very clearly and to the point. As a neophyte who had just passed the series 7 and working on the series 4, most books on options would have been absolutely overwhelming. Your book presents a clear progressive education on the topic and it is a constant resource.” M.
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- Options trading can be a complex and challenging field.
Volatility skew refers to the phenomenon where options with different strike prices on the same underlying asset have different implied volatilities. Volatility trading focuses on predicting changes in the volatility of an underlying asset, rather than its price direction. Index arbitrage exploits price discrepancies between index futures and the underlying stocks. Program trading involves the simultaneous buying or selling of a large number of stocks, often triggered by computer algorithms. A market basket is a portfolio of stocks designed to replicate the performance of a specific index. It’s a riskless arbitrage strategy that profits from price discrepancies between the options.
Further Reading
However, it’s a riskier strategy, as the entire investment can be lost if the stock price doesn’t rise above the strike price before expiration. Inside this revised edition are scores of proven techniques and business-tested tactics for investing in many of the innovative new options products available. This updated and revised fifth edition of the bestselling Options as a Strategic Investment gives you the latest market-tested tools for improving the earnings potential of your portfolio while reducing downside risk—no matter how the market is performing. “This book is an important part of any serious trader’s library. I highly recommend it to both inexperienced and experienced option traders alike.” Reviewers appreciate its depth and ability to explain complex concepts, making it a go-to text for serious options traders. The option market shows every sign of becoming a stronger force in the investment world.
Options as a Strategic Investment Review and Edition Comparison
– Free trading journal template– Custom indicators, watchlists, & scanners– Access our free trading community The book has been well-received by readers and reviewers alike. Options trading can be a complex and challenging field. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. Click Here for a detailed explanation of the differences between the 4th and 5th editions. Detailed examples, exhibits, and checklists show you the power of each strategy under carefully described market conditions.
Shirts, totes, socks, and more for book lovers Many consider it essential for both beginners and experienced traders. Readers praise its thorough explanations, detailed strategies, and value as a reference. This is a measure of the potential profitability of an option strategy, calculated by weighting the potential outcomes by their probabilities. This approach can be profitable regardless of whether the market goes up or down. It can be used for index arbitrage, portfolio rebalancing, or other strategies.
The pricing of LEAPS is influenced by the same factors as short-term options, but with a greater emphasis on interest rates and dividends. This longer time horizon allows investors to implement strategies that benefit from long-term trends or anticipated events. LEAPS (Long-Term Equity Anticipation Securities) are options with expiration dates extending up to three years into the future.