986 
Chicago Board Options Exchange (CBOE), 22 
structured products listed, 618 
Chicago Mercantile Exchange, 507, 509, 510, 672 
option quotes, 515-516 
trading limits on futures options, 680 
Chicago Board of Trade: 
trading limits on futures contracts, 658 
trading limits on futures options, 680 
Classes of options, 5-6 
Closing transactions, 6 
Collar, 275, 840 
no-cost, 278-280 
Commissions, 17-18 
Concepts, advanced, 846-907 (see also Advanced 
concepts) 
Conservative covered write, 46 
Contango, 697 
Conversion, 253-255, 428-430, 431-438 (see also Put 
options basics and Arbitrage) 
reversal, 254, 428-430, 431-438 
risks in, four, 433-43 7 
summary, 437-438 
Convertible security, covered writing against, 88-90, 94 
Covered call writing, 39-94 
definition, 39 
diversifying return and protection, 66-70 
"combined" write, 67-69 
techniques, fundamental, 66-69 
techniques, other, 69-70 
execution of order, 56-58 
contingent order, 57 
net position, establishing, 57-58 
follow-up action, 70-87, 94 
aggressive action if stock rises, 71, 79-81 
assignment, action to avoid if time premium 
disappears, 71, 86-87 
expiration, at or near, 83-85 
getting out, 82-83 
locked-in loss, 73 
protective action if stock drops, 71-79 
rolling action, 71-80 (see also Rolling action) 
rolling forward/down, 83-85 
spread, 76 
uncovered position, avoiding, 86 
when to let stock be called away, 86-87 
importance, 39-42 
for downside protection, 39 
increase in stock price, benefits of, 40-41 
profit graph, 41-42 
quantification, 41-42 
and naked put writing, differences between, 
294-295 
objective, 42 
Index 
PERCS (Preferred Equity Redemption Cumulative 
Stock), 91 
philosophy, 42-45 
annual returns, 47 
as conservative strategy, 46-4 7 
Depository Trust Corp (DTC), role of, 43 
in-the-money covered writes, 43-45, 93 
letter of guarantee, 43 
out-of-the-money covered writes, 43-45, 93 
physical location of stock, 43 
total return concept, 45-47, 60-61, 93 
return on investment, computing, 47-56 
compound interest, 53-54 
downside break-even point, 48, 49-50 
in margin accounts, 50-53 
price,changesin,55-56 
return if exercised, 47-48 
return if unchanged, 48, 49 
size of position, 54-55 
static return, 49 
selecting position, 58-62 
downside protection, 59-60 
returns, projected, 59 
strategy, importance of, 60-62 
total return concept, 60-61 
special writing situations, 87-93 
against convertible security, 88-90, 94 
against LEAPS, 91, 94 
against warrants, 90-91 
incremental return concept, 87-88, 91-93 
and stock ownership, 42 
summary, 93-94 
and uncovered put writing strategy, similarity of, 
293-294 
writing against stock already owned, 62-66 
caution, 65-66 
Covered pit sale, 300 
Covered straddle write, 302-305 
Crack spread, 702-704 
Credit spread, 170, 179 
Cross-currency spreads, 701 
Cumulative density function (CDF), 806 
Customer margin method, 5 
Customer margin option requirements, 667 
Day trading, call buying and, 101-102 
Debit spread, 170 
Definitions, 3-35 (see also under particular definition or 
under Options) 
Delta, 848-853, 866 
calculation of by Black-Scholes model, 457 
excess value, 764