Introduction    • xv
will soon be paupers. Making good decisions is a vital part of being an 
intelligent option investor; frenetic, haphazard, and unconsidered trading 
is most certainly not.
Unlike books about securities analysis, you will not find detailed dis-
cussions about every line item on a financial statement. Understanding 
how a company creates value for its owners and how to measure that value 
is an important step in being an intelligent option investor; being able to 
rattle off information about arcane accounting conventions is not.
To paraphrase Warren Buffett,
4 this book aims to provide you with 
a sound intellectual framework for assessing the value of a company and 
making rational, fact-based decisions about how to invest in them with the 
help of the options market.
The book is split into three parts:
• part I provides an explanation of what options are, how they are 
priced, and what they can tell you about what the market thinks the 
future price of a stock will be. This part corresponds to the second 
step of intelligent option investing listed earlier.
• part II sets forth a model for determining the value of a company 
based on only a handful of drivers. It also discusses some of the 
behavioral and structural pitfalls that can and do affect investors’ 
emotions and how to avoid them to become a better, more rational 
investor. This part corresponds to the first step of intelligent option 
investing listed earlier. 
• part III turns theory into practice—showing how to read the nec-
essary information on an option pricing screen; teaching how 
to measure and manage leverage in a portfolio containing cash, 
stocks, and options; and going into detail about the handful of op-
tion strategies that an intelligent option investor needs to know to 
generate income, boost growth, and protect gains in an equity port-
folio. This part corresponds to the final step of intelligent option 
investing listed earlier.
no part of this book assumes any prior knowledge about options or 
stock valuation. That said, it is not some sort of “Options for Beginners” or 
“My First Book of valuation” treatment either.