xviii Preface 
are made for using the computer as a tool in follow-up action, including an example 
printout of an advanced follow-up analysis. 
THIRD EDITION 
There were originally six new chapters in the third edition. There were new chapters 
on LEAPS, CAPS, and PERCS, since they were new option or option-related prod­
ucts at that time. 
LEAPS are merely long-term options. However, as such, they require a little 
different viewpoint than regular short-term options. For example, short-term inter­
est rates have a much more profound influence on a longer-term option than on a 
short-term one. Strategies are presented for using LEAPS as a substitute for stock 
ownership, as well as for using LEAPS in standard strategies. 
PERCS are actually a type of preferred stock, with a redemption feature built 
in. They also pay significantly larger dividends than the ordinary common stock. The 
redemption feature makes a PERCS exactly like a covered call option write. As such, 
several strategies apply to PERCS that would also apply to covered writers. 
Moreover, suggestions are given for hedging PERCS. Subsequently, the PERCS 
chapter was enveloped into a larger chapter in the fourth edition. 
The chapters on futures and other non-equity options that were written for the 
second edition were deleted and replaced by two entirely new chapters on futures 
options. Strategists should familiarize themselves with futures options, for many prof­
it opportunities exist in this area. Thus, even though futures trading may be unfamil­
iar to many customers and brokers who are equity traders, it behooves the serious 
strategist to acquire a knowledge of futures options. A chapter on futures concentrates 
on definitions, pricing, and strategies that are unique to futures options; another chap­
ter centers on the use of futures options in spreading strategies. These spreading 
strategies are different from the ones described in the first part of the book, although 
the calendar spread looks similar, but is really not. Futures traders and strategists 
spend a great deal of time looking at futures spreads, and the option strategies pre­
sented in this chapter are designed to help make that type of trading more profitable. 
A new chapter dealing with advanced mathematical concepts was added near 
the end of the book. As option trading matured and the computer became more of 
an integral way of life in monitoring and evaluating positions, more advanced tech­
niques were used to monitor risk. This chapter describes the six major measures of 
risk of an option position or portfolio. The application of these measures to initialize 
positions that are doubly or triply neutral is discussed. Moreover, the use of the com­
puter to predict the results and "shape" of a position at points in the future is 
described.