No-Hype Options Trading: Myths, Realities, and Strategies That Really Work

A straightforward guide to successfully trading options Options provide traders and investors with a wide range of strategies to lock in profits, reduce risk, generate income, or speculate on market direction. However, they are complex instruments and can be difficult to master if misunderstood. No-Hype Options Trading offers the straight truth on how to trade the options market. In it, author Kerry Given provides realistic strategies to consistently generate income every month, while debunking many myths about options trading that tend to lead retail traders astray. Along the way, he makes a conscious effort to avoid complex strategies that are appropriate only for market makers or professional traders, and instead focuses on low-risk strategies that can be easily implemented and managed by a part-time trader. Shows how you can use option spreads in conjunction with stocks to produce a regular stream of income Each chapter includes exercises to help you master the material presented Examines how you can adjust option positions as market conditions change in order to maintain an optimal risk/reward profile Written for anyone interested in successfully trading options, this reliable resource cuts through the hype and misinformation that surrounds options trading and presents a realistic path to profits.

Table of Contents:
Acknowledgments xi Introduction xiii Part 1 The Foundations of Options Trading 1 Chapter 1 Option Basics 3 Definitions of Calls and Puts 3 Are You Long or Short? 4 Option Contract Size 4 Is My Option In- or Out-of-the-Money? 5 Option Trade Orders 5 Option Expiration 6 LEAPS Options 7 Option Settlement 7 Options Cycles 8 Chapter 2 Probability Distributions 11 The Gaussian Distribution 11 Application to the Real World 12 Risk-Adjusted Returns 15 High-Probability Trading 17 Low-Probability Trading 18 Options Trading Myths 20 What Is a Conservative Trade? 21 Exercises 22 Chapter 3 Options Pricing and Implied Volatility 25 The Black-Scholes Pricing Model 25 The Greeks 26 Implied Volatility 27 Building the Price of an Option 28 A Closer Look at the Greeks 29 How Will We Use the Greeks? 31 Exercises 32 Chapter 4 Vertical Spreads 33 Building the Vertical Spread 33 Effects of Implied Volatility 35 Early Exercise 41 Expiration and Exercise 43 Margin Requirements 44 Application of Probability Calculations 45 Risk/Reward and Probability of Success 46 Exercises 47 Part 2 Options Strategies for Income Generation 49 Chapter 5 Using Options to Boost Income in a Stock Portfolio 51 The Classic Covered Call Strategy 52 Strategic Considerations 53 The Notorious Selling Naked Puts Strategy 53 Selling Naked Puts for Income 54 Buying Stocks at a Discount 56 Combining the Covered Call with Selling Naked Puts 56 Early Exercise 58 Risk Management 60 The Achilles’ Heel of Directional Strategies 61 Exercises 62 Chapter 6 Calendar and Double Calendar Spreads 63 Vega Risk and Calendar Spreads 66 Volatility Skews 67 Searching for Calendar Candidates 70 Entering and Managing the Trade 71 Early Exercise 71 Adjustments 72 Out-of-the-Money Calendar Spreads 73 Double Calendar Spreads 73 Determining the Optimal Strike Prices 76 Trade Management and Adjustments 82 Multiple Calendar Spread Positions 83 Exercises 83 Chapter 7 Double Diagonal Spreads 85 Diagonal Spreads 85 Double Diagonal Spreads 87 Managing the Trade 90 Double Diagonals vs. Double Calendars 91 Exercises 92 Chapter 8 Butterfly Spreads 95 At-the-Money and Out-of-the-Money Butterfly Spreads 95 Iron Butterfly Spreads 99 The Broken-Wing Butterfly 99 Margin Requirements 101 Trade Management 103 Closing Butterfly Spreads 106 Butterfly Spreads as Adjustments 111 Exercises 112 Chapter 9 Condor Spreads 113 The Basic Condor Spread 113 The Opportunistic Model 116 The Insurance Model 119 Iron Condor Spreads 121 Vega Risk and the Condor 124 The Short-Term Iron Condor 128 The Long-Term Iron Condor 129 Capital Management 131 Risk Management 131 Adjustment Techniques 132 Adjustment Pros and Cons 134 Adjustment Case Studies 135 Managing the Iron Condor with the Greeks 138 Advanced Adjustment Techniques 140 Iron Condor Trading Systems 140 Butterflies and Condors are Cousins 144 Exercises 146 Chapter 10 Delta-Neutral Trading Strategies 149 Risk Management Systems 151 Challenging Markets for the Delta-Neutral Trader 152 Two Distinct Trading Philosophies 153 The “Secret” of Success 155 Chapter 11 Make Your Trading a Business 157 Getting Started 157 Managing Losses 159 The Trading Plan 159 Money Management 160 The Psychology of Trading 161 Living with the Two-Headed Monster 163 Required Tools for This Business 164 What’s Next? 165 Appendix: Answers to the Chapter Exercises 169 Glossary 185 Index 193

About the Author :
KERRY W. GIVEN, PHD, is founder of Parkwood Capital, LLC, a business that consists of stock and options coaching, a monthly newsletter, a small hedge fund, and a trading advisory service. He writes a monthly column, "Ask Dr. Duke," for, and conducts monthly webinars with, SFO magazine. Given speaks frequently at trading conferences and on behalf of various option brokerage firms. He is the only options coach and educator who publishes his trading results live as they occur. Given earned his BS from the University of Florida and his PhD from the University of Minnesota.