26 lines
1.5 KiB
Plaintext
26 lines
1.5 KiB
Plaintext
3
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Chapter 1
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OptiOn Fundamentals
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This chapter introduces what an option is and how to visualize options in
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an intelligent way while hinting at the great flexibility and power a sensible
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use of options gives an investor. It is split into three sections:
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1. Option Overview: Characteristics, everyday options, and a brief
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option history.
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2. Option Directionality: An investigation of similarities and differ -
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ences between stocks and options. This section also contains an
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introduction to the unique way that this book visualizes options
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and to the inescapable jargon used in the options world and a bit
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of intelligent option investor–specific jargon as well.
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3. Option Flexibility: An explanation of why options are much more
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investor-friendly than stocks, as well as examples of the handful of
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strategies an intelligent option investor uses most often.
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Even those of you who know something about options should at the
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very least read the last section. Y ou will find that the intelligent option
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investor makes very close to zero use of the typical hockey-stick diagrams
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shown in other books. Instead, this book uses the concept of a range of
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exposure. The rest of the book—discussing option pricing, corporate
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valuation, and option strategies—builds on this range-of-exposure concept,
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so skipping it is likely to lead to confusion later.
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This chapter is an important first step in being an intelligent option
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investor. Someone who knows how options work does not qualify as be-
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ing an intelligent option investor, but certainly, one cannot become an |