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Part III 
IntellIgent OptIOn 
InvestIng
Now that you understand how options work and how to value companies, 
it is time to move from the theoretical to the practical to see how to apply 
this knowledge to investing in the market. With Part III of this book, we 
make the transition from theoretical to practical, and by the time you finish 
this part, you will be an intelligent option investor.
To invest in options, you must know how to transact them; this is the 
subject of Chapter 7. In it, you will see how to interpret an option pricing 
screen and to break down the information there so that you can under -
stand what the option market is predicting for the future price of a stock. I 
also talk about the only one of the Greeks that an intelligent option investor 
needs to understand well—delta.
Chapter 8 deals with a subject that is essential for option investors—
leverage. Not all option strategies are levered ones, but many are. As such, 
without understanding what leverage is, how it can be measured and used, 
and how it can be safely and sanely incorporated into a portfolio, you can-
not be said to truly understand options.
Chapters 9–11 deal with specific strategies to gain, accept, and mix 
exposure. In these chapters I offer specific advice about what strike prices 
are most effective to select and what tenors, what to do when the expected 
outcomes of an investment materially change, and how to incorporate 
each strategy into your portfolio. Chapter 11 also gives guidance on so-
called option overlay strategies, where a position in a stock is overlain by 
an option to modify the stock’s risk-reward profile (e.g., protective puts for 
hedging and covered calls for generating income).