2  •   The Intelligent Option Investor
The first part of this book will give you a good understanding of 
what options are, how their prices are determined, and how those prices 
fluctuate based on changes in market conditions.
There is a good reason to develop a solid understanding of this 
theoretical background: the framework the option market uses to determine 
the price of options is based on provably faulty premises that, while 
“approximately right” in certain circumstances, are laughably wrong in 
other circumstances. The faults can be exploited by intelligent, patient inves-
tors who understand which circumstances to avoid and which to seek out.
Without understanding the framework the market uses to value 
options and where that framework breaks down, there is no way to exploit 
the faults. Part I of this book, in a nutshell, is designed to give you an 
understanding of the framework the market uses to value options.
This book makes extensive use of diagrams to explain option theory, 
pricing, and investment strategies. Those readers of the printed copy of this 
book are encouraged to visit the Intelligent Option Investor website (www 
.IntelligentOptionInvestor.com) to see the full-color versions of the type of 
illustrations listed here. Doing so will allow you to visualize options even 
more effectively in the distinctive intelligent option investing way.