Most trading literature on option strategies tends to favor mathematical formulas to define the construction of spreads. Guy Cohen chose to use graphical logic, even for Greeks specific to a particular strategy, to use charts to piece together the branches of the chart.
Interrelated charts are a more intuitive way to learn people who are less inclined to numerical formulas. Still, the logic of mathematics is still powerful and complete.
The layout of the book makes it easy to navigate through the text. In addition to the strategies listed in the chapters and pages, the main categories and subcategories of the strategy are mentioned, which are:
- Proficiency: novice, intermediate, advanced and expert traders.
- Direction: Bulgaria, bearish and direction neutral.
- Volatility: high volatility and low volatility.
- Risk/reward: cap risk, no cap risk, cap reward and no cap reward.
- Type: income and capital gains.
Guy Cohen has extensive experience in derivatives and stock markets in the US and UK. He specializes in trading and analytics applications from real estate to derivatives and has developed comprehensive business, trading and training models, all designed to maximize user convenience.
There are enough reader reviews on Amazon and Google Book Search to help you decide if you will get the book. For those who have just started or are about to read this book, I have summarized the core concepts in the larger and most important chapters to help you get them done faster.
The number to the right of the title of this chapter is the number of pages included in this chapter. It is not a page number. The percentage indicates that each chapter constitutes a total of 302 pages, excluding the appendix.
1. Four basic selection strategies. 20, 6.62%. 2. Income strategy. 68,22.52%. 3. Vertical spreads. 30, 9.93%. 4. Volatility strategy. 56, 18.54%. 5. Horizontal strategy. 44, 14.57%. 6. Leverage strategy. 20, 6.62%. 7. Integrated strategy. 54, 17.88%. 8. Taxes for stock and option traders. 10,3.31%.
Focus on Chapters 2, 4, 5, and 7, which account for 74% of the book. These chapters are relevant to the actual transaction purpose. The following are the key points of these focus chapters, which I summarize from the perspective of retail options traders.
Chapter 2: Income Strategy. from
These strategies build spreads, some of which sell Theta as a premium in the short term [usually 30-45 days] to collect revenue. In its legacy, the strategy may result in a net debit or net credit spread. There are 13 types of spreads in this category: covered phone, short [naked], bull spread, bear phone spread, long iron butterfly, long iron vulture, covered hurd, covered short, killing, calendar call, right Corner call, calendar Put, Diagonal Put and Covered Put [aka married].
Chapter 4: Volatility Strategy. from
As long as the price explosion is out of range, these strategies use a price difference in the direction of the price. For a given price explosion, the volatility of the spread needs to rise in the net debit spread and the net spread falls. There are 11 types of transmission defined in this category: spanning, strangling, banding, banding, liner, short-bowing butterflies, short-bowed butterflies, short-calling vultures, short vultures, short iron butterflies, and short iron vultures.
Chapter 5: Horizontal strategy. from
These strategies involve non-targeted spreads that require prices to drift within a limited range. Since the price is still limited by the range, the spread of the net interest margin needs to rise, and the net credit spread needs to fall. There are 11 types of spreads in this category: short span, short horn, short, long-haired butterfly, long-haired butterfly, long-haired vulture, long vulture, improved butterfly, improved butterfly, long iron butterfly and long iron Vulture.
Chapter 7: Integrated Strategy from
. The integrated strategy simulates the risk profile of stocks, futures or other options positions by combining call options, with or without stock put options. Although most of the synthetic positions are usually long or short positions. If you have a 401K plan or an employee stock purchase plan is long-term inventory, then considering a synthetic strategy can make sense because you are already a long-term Delta. Regardless of whether the strategy involves stocks, some synthetic spreads have unlimited risks. There are disadvantages to using a composition. In this category, 12 types of transmission are defined: collar, synthetic call, synthetic input, long-term synthetic leap, long-term synthetic leap, short-term synthetic leap, short-term synthetic leap, long-term integrated future, short-term integrated future, long-term combination, short-term combination And a long box.
From the perspective of retail options traders, I prefer to create positions without using stocks. The combined use of stocks at a certain location would make each transaction more capital-intensive than expected. In particular, if your trading account is less than $50,000. The use of stocks in the allocation of these positions does not increase the real value of the control risk, and there is no additional monetary benefit in bundling the available trading capital in the stock-related composite position, otherwise it can be achieved without the use of stocks. As an option trader, you first need to deal with the stock itself as little as possible. In addition to configuring the required option positions around the base product, you can use the cash settlement index instead of the stock-settlement index.
Of the total of 56 strategies covered in this book, I reduced the list to 35 limited risk spread types, without requiring inventory as part of its original construction. Limited risk means the maximum loss limit - "Capped Risk" is the term used in this book. This should always be the starting point for any strategy you choose to build. Don't just consider the infinite profit [unrestricted reward] aspect of the strategy, and you won't realize that there is unlimited loss [unrestricted risk] in the same strategy.
Limited risk and "unrestricted" rewards and their directional prospects.
1. Long-term calls are bullish.
2. Long-term investment. Bearish.
3. Return the ratio. Bearish; reverse bullish.
4. Call option return spread. Bullish; reverse bearish.
5. Straddle. Doesn't matter / - Neutral.
6. Kill. Doesn't matter / - Neutral. Stripped. Bearish.
8. Strap. Bullish.
9. Guts. Doesn't matter / - Neutral. 1-9 is the debit difference: IV needs to rise.
10. Bull Put Ladder. Bearish. 10-11 is the credit spread: IV needs to fall.
11. Bear Call Ladder. Bullish.
Limited risk limited risk and its directional prospects.
12. Bear market communication. Bearish.
13. Bull Call Spread. Bullish.
14. Long-term call calendar. Bullish; does not matter / - Neutral.
15. Long-term calendar. Bullish; does not matter / - Neutral.
16. Long called the butterfly. Doesn't matter / - Neutral.
17. Long-term butterfly. Doesn't matter / - Neutral.
18. Long box. Doesn't matter / - Neutral.
19. Long Call Condor. Doesn't matter / - Neutral.
20. Long Put Condor. Doesn't matter / - Neutral.
21. Long iron butterfly. Doesn't matter / - Neutral.
22. Long iron vulture. Doesn't matter / - Neutral. 12-22 is the debit difference: IV needs to rise.
23. Bear call spread. Bearish. 23-35 is the credit spread: IV needs to fall.
24. Bull Put Spread. Bullish.
25. Short iron butterfly. Doesn't matter / - Neutral.
26. Short iron vultures. Doesn't matter / - Neutral.
27. Diagonal phone. Bearish.
28. Diagonally placed. Bullish.
29. Modified Call Butterfly. Bearish - Neutral.
30. Refit the butterfly. Bulgarian - neutral.
31. Short [naked] bearish. Bullish.
32. Short call the butterfly. Doesn't matter / - Neutral.
33. Short call vulture. Doesn't matter / - Neutral.
34. Put the butterfly in the short term. Doesn't matter / - Neutral.
35. Short Put Condor. Doesn't matter / - Neutral.
With the exception of 35 defined risk spreads, stocks are not required to enter as part of their original structure, and there are six defined risk spreads that require stocks to position their positions. The six locations I have carefully excluded from the list above are Long Call Synthetic Straddle, Long Put Synthetic Straddle, Synthetic Call, Synthetic Put, Collar and Covered Call.
In short, for new intermediate traders, don't be overwhelmed by the 56 strategies in the book. It is called "choosing a strategic Bible" for some reason. It is important to have an in-depth understanding of long-term call options, long-term put options, short call options, short put options, long-term vertical call/put options, short-term vertical call/put options, and long-term call options. These are the four basic options strategies, plus the vertical and calendar - the only two strategies that floor traders define as true spreads. Other combinations are mixtures with or without stocks.
Orignal From: Options Trading Strategy - Book Review - Guy Cohen, Options Strategy Bible
No comments:
Post a Comment