xx Preface 
stocks in the past few years. Also, the margin rules were changed in 2000, and those 
changes are noted throughout the book. 
Those chapters dealing with the sale of options - particularly naked options -
have been expanded to include more discussion of the way that stocks behave and 
how that presents problems and opportunities for the option writer. For example, in 
the chapter on Reverse Spreads, the reverse calendar spread is described in detail 
because - in a high-volatility environment - the strategy becomes much more viable. 
Another strategy that receives expanded treatment is the "collar" - the purchase 
of a put and simultaneous sale of a call against an underlying instrument. In fact, a 
similar strategy can be used - with a slight adjustment - by the outright buyer of an 
option (see the chapter on Spreads Combining Puts and Calls). 
I am certain that many readers of this book expect to learn what the "best" 
option strategy is. While there is a chapter discussing this subject, there is no defin­
itively "best" strategy. The optimum strategy for one investor may not be best for 
another. Option professionals who have the time to monitor positions closely may be 
able to utilize an array of strategies that could not possibly be operated diligently by 
a public customer employed in another full-time occupation. Moreover, one's partic­
ular investment philosophy must play an important part in determining which strat­
egy is best for him. Those willing to accept little or no risk other than that of owning 
stock may prefer covered call writing. More speculative strategists may feel that low­
cost, high-profit-potential situations suit them best. 
Every investor must read the Options Clearing Corporation Prospectus before 
trading in listed options. Options may not be suitable for every investor. There are 
risks involved in any investment, and certain option strategies may involve large risks. 
The reader must determine whether his or her financial situation and investment 
objectives are compatible with the strategies described. The only way an investor can 
reasonably make a decision on his or her own to trade options is to attemptto acquire 
a knowledge of the subject. 
Several years ago, I wrote that "the option market shows every sign of becom­
ing a stronger force in the investment world. Those who understand it will be able to 
benefit the most." Nothing has happened in the interim to change the truth of that 
statement, and in fact, it could probably be even more forcefully stated today. For 
example, the Federal Reserve Board now often makes decisions with an eye to how 
derivatives will affect the markets. That shows just how important derivatives have 
become. The purpose of this book is to provide the reader with that understanding 
of options. 
I would like to express my appreciation to several people who helped make this 
book possible: to Ron Dilks and Howard Whitman, who brought me into the bro-