316  •   Index
Strike prices: (continued )
long strangle, 206–207
short diagonal, 239–240
short put, 215
short-call spread, 222–228
Strike–stock price ratio (K/S):
and change in closing price,  
146–147
defined, 53–54
and forward volatility, 67–74
Structural constraints, 86, 104
Structural downturns, 302n2  
(Chapter 11)
Structural growth stage, 94, 95
Structural impediments, 131–139
buy-side, 132–136
and investment strategies,  
137–139
principals vs. agents, 131–132
sell-side, 136–137
Sun Microsystems, 108
Supply-side constraints, 83
Symmetry, bias associated with, 
114–118
T
“Taking profit” with covered calls, 245
Taxes, BSM model assumption about, 
32, 40, 46
Technical analysis, 115
Tenor, 297n3 (Chapter 3)
defined, 59
for long calls, 190–192
for long puts, 202–203
for long strangles, 206
for protective puts, 252–254
for short puts, 214–215
for short-call spreads, 222
Terminal phase, 86
Time decay, 65–67
Time horizons:
long, 279–281
short, 270–272
Time value:
intrinsic vs., 56–59
of money, 87, 93–95
Time Warner, 103
Time-to-expiration assumptions,  
64–67
Toyota, 97
Trading restrictions, 32, 40, 46
Troughs (business-cycle):
operational leverage in, 283–284
and peaks, 302–303n2
Tversky, Amos, 123, 126
“2-and-20” arrangements, 134
U
Uncertainty, 118–119
Underexposure, 247
Underlying assets:
fungible, 272–273
and future stock price, 33–34
University of Chicago, 41
Unlevered investments:
levered vs., 164–165
in portfolios, 175–176, 178
Unrealized losses, 175–176
Unrealized profit, 254–255
Unused leg, long strangle, 207
U.S. Treasury bonds, 45–46
Utility curves, 124–126
V
Valuation:
golden rule of, 77–89
multiples-based, 99–100
shortcuts for, 93–97
value drivers in, 91–97
Valuation range:
BSM cone vs., 160–162
creating, 122
and margins of safety, 197–199
overlaying BSM cone with, 160
and strike price selection, 192–194
Valuation risk, 265–267