24 lines
1.7 KiB
Plaintext
24 lines
1.7 KiB
Plaintext
487
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Brokers are fond of pointing out to possible buyers of options that they are a splendid thing to
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buy, and pointing out to sellers that they are a splendid thing to sell. They believe implicitly in
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this paradox. Thus the buyer does well, the seller does well, and it is not necessary to stress the
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point that the broker does well enough. Many examples can be cited showing all three of them
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emerging from their adventures with a profit. One wonders why the problem of unemployment
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cannot be solved by having the unemployed buy and sell each other options, instead of mooning
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around on those park benches.
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—Fred Schwed
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Where Are the Customers’ Yachts?
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■ Comparing Trading Strategies
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The existence of options greatly expands the range of possible trading strategies. For example, in the
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absence of an option market, a trader who is bullish can either go long or initiate a bull spread (in those
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markets in which spread movements correspond to price direction). However, if option-related trad-
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ing approaches are included, the bullish trader can consider numerous alternative strategies including:
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long out-of-the-money calls, long in-the-money calls, long at-the-money calls, short out-of-the-money
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puts, short in-the-money puts, short at-the-money puts, “synthetic” long positions, combined positions
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in futures and options, and a variety of bullish option spreads. Frequently, one of these option-related
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strategies will offer significantly better profit potential for a given level of risk than an outright futures
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position. Thus, the trader who considers both option-based strategies and outright positions should
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have a decided advantage over the trader who restricts his trades to only futures.
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Option Trading
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Strategies
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Chapter 35 |