Index   • 311
J
Jaguar, 103
Joint ventures (JVs), 84–85
JP Morgan Chase, 236–237
K
Kahneman, Daniel, 42, 123, 126
Keen, Steven, 43
Keynes, John Maynard, 263
Kroger, 100
K/S (see Strike–stock price ratio)
L
Lambda, 169–173
Large numbers, law of, 85, 297n2 
(Chapter 4)
Last (option quotes), 146
LEAPS (see Long-term equity 
anticipated securities)
Legs (option structure), 27
Lehman Brothers, 264
Lenovo, 299n5 (Chapter 5)
Leptokurtic distribution, 45
Leverage, 163, 282–286
financial, 164, 197–199, 285–286
operating (operational), 101,  
197–199, 282–284
(See also Investment leverage)
Leverage ratio, 228–229
Levered investments, portfolios with, 
176–183
Liabilities, hidden, 110–111
Life insurance companies, 135
Liquidity risk, 256, 263
Listed look-alike option market, 6
Literary work, options on, 5–6
Lo, Andrew, 42
Load, 132, 134
Loans, call options as,  
167–168
Lognormal curve, 37
Lognormal distribution,  
36–37
Long calls, 13, 189–201
about, 189
BSM cone, 189
in long diagonals, 235–237
portfolio management with,  
196–201
strike price for, 192–196
tenor for, 190–192
Long diagonals, 235–237
Long puts, 201–205
about, 201–202
BSM cone, 201
portfolio management with,  
204–205
in short diagonals, 238–240
strike price for, 203
tenor for, 202–203
Long straddles, 208–209
Long strangles, 26–27, 205–207, 209
Long-term equity anticipated 
securities (LEAPS), 153, 191, 
280–281
Loss leverage:
conventions for, 182–183
formula, 178–179
with short puts, 211–212
Losses:
with levered vs. unlevered 
instruments, 165–166
locking in, 245–247
on range of exposure, 15
unrealized, 175–176
(See also Realized losses)
M
MacKinlay, Craig, 42
Margin calls, 168
Margin of safety, 197–199
Margin requirements, 211–212
Market conditions, 59–74
assumptions about drift and 
dividend yield, 67
simultaneous changes in, 67–74