Index 
PERCS (Preferred Equity Redemption Cumulative 
' Stock) (continued) 
pricing, 634-636 
protecting PERCS with listed options, 625-626 
redemption feature, removing, 626-627 
redemption price, changing, 627-629 
rolling down/up, 628-629 
selling call against long PERCS as ratio write, 
629-631 
selling short, 632-633 
summary, 636-637 
Phantom interest, 592 
Philadelphia Stock Exchange (PHLX), 671, 673, 
678-679 
Portfolio hedge, 539-541 
Portfolio insurance, 563-564 
Position delta, 162-163, 167 
Position limit rule, 253 
Position vega, 757 
POT system of NYSE, 555-556 
Premium, 7-8 
time value, 7-8 
Price of option, factors influencing, 9-15 
cash dividend rate of underlying stock, 14-15 
dividends and lower call option price, 14-15 
call option price curve, 10-13 
market dynamics, nonquantitative, 15 
risk-free interest rate, 14 
striking price of option, 9-10 
time remaining until expiration, 11-13 
time value premium decay, 13-14 
underlying stock, price of, 9-10 
volatility of underlying stock, 13-14 
Price-weighted indices, 497-500 
computing, 497-498 
divisor, 497-500 
Dow Jones indices, 499 
each stock with equal number of shares, 497, 499 
Major Market Index (XMI), 499 
Probability calculator, 798-799, 824, 827-829 
Probability of stock price movement, 798-809 (see also 
Stock prices) 
Profits, locking in, four strategies for, 108-111 
Program trading, 537-547 (see also Stock index 
hedging) 
Protected short sale, 118-121, 270 (see also Call buying 
strategies) 
Protective collar, 275 
no-cost, 278-280 
and splitting strikes, 328 
Put, sale of, 291-301 
buying stock below its market price, 299-300 
caution, 299-300 
covered put, 300 
follow-up action, 295-296 
naked put write, evaluating, 296-298 
ratio put writing, 300-301 
uncovered, 292-295 
cash-based put writing, 294-295 
993 
covered call writing, similarity to, 293-294 
naked put writing, differences between, 294-295 
Put arbitrage, 445 (see also Arbitrage) 
Put bear spreads, effects on of implied volatility 
changes, 777-778 
Put buying: 
in conjunction with call purchases, 281-291 
mathematical calculations of volatility, applying to, 
478-479 
straddle buying, 282-288 
equivalences, 283-284 
follow-up action, 285-288 
reverse hedge, equivalent to, 283 
reverse hedge with puts, 284 
selecting, 285 
strangle, buying, 288-291 
trading against straddle, 287 
Put buying in conjunction with common stock owner­
ship, 271-280 
as protection for covered call writer, 275-278 
bull spread as equivalent, 278 
long-term effects, 277-278 
protective collar, 275, 278-280 
rolling down, 276 
no-cost collars, 278-280 
lower strikes as partial covered write, 279-280 
synthetic long call, 271 
tax considerations, 275 
which put to buy, 273-274 
equivalent strategies, 27 4 
slightly out-of-the-money put preferable, 27 4 
Put option: 
effects on of implied volatility changes, 765-766 
pricing, applying mathematical calculations of 
volatility to, 4 77-4 78 
Put option basics, 245-255 
assignment, 250-253 
anticipating, 251-252 
and dividend payment dates, 252 
position limits, 253 
conversion, 253-255 
no risk, 254 
reversal. 254 
dividends, effect of on premiums, 248-250 
exercise, 250-253 
in-the-money, 246-247 
out-of-the-money, 246-247 
pricing, 247-248, 249 
implied volatility, 248