38 lines
2.9 KiB
Plaintext
38 lines
2.9 KiB
Plaintext
Preface xix
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There were substantial revisions to the chapters on index options as well. Part
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of the revisions are due to the fact that these were relatively new products at the time
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of the writing of the second edition; as a result, many changes were made to the prod
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ucts - delisting of some index options and introduction of others. Also, after the crash
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of 1987, the use of index products changed somewhat (with introduction of circuit
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breakers, for example).
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FOURTH EDITION
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Once again, in the ever-changing world of options and derivatives, some new
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important products have been introduced and some new concepts in trading have
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come to the forefront. Meanwhile, others have been delisted or fallen out of favor.
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There are five new chapters in the fourth edition, four of which deal with the most
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important approach to option trading today - volatility trading.
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The chapter on CAPS was deleted, since CAPS were delisted by the option
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exchanges. Moreover, the chapter on PERCS was incorporated into a much larger
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and more comprehensive chapter on another relatively new trading vehicle - struc
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tured products. Structured products encompass a fairly wide range of securities -
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many of which are listed on the major stock exchanges. These versatile products
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allow for many attractive, derivative-based applications - including index funds that
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have limited downside risk, for example. Many astute investors buy structured prod
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ucts for their retirements accounts.
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Volatility trading has become one of the most sophisticated approaches to
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option trading. The four new chapters actually comprise a new Part 6 - Measuring
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And Trading Volatility. This new part of the book goes in-depth into why one should
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trade volatility (it's easier to predict volatility than it is to predict stock prices), how
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volatility affects common option strategies - sometimes in ways that are not initially
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obvious to the average option trader, how stock prices are distributed ( which is one
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of the reasons why volatility trading "works"), and how to construct and monitor a
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volatility trade. A number of relatively new techniques regarding measuring and pre
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dicting volatility are presented in these chapters. Personally, I think that volatility
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buying of stock options is the most useful strategy, in general, for traders of all levels
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- from beginners through experts. If constructed properly, the strategy not only has
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a high probability of success, but it also requires only a modest amount of work to
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monitor the position after it has been established. This means that a volatility buyer
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can have a "life" outside of watching a screen with dancing numbers on it all day.
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Moreover, most of the previous chapters were expanded to include the latest
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techniques and developments. For example, in Chapter 1 (Definitions), the entire
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area of option symbology has been expanded, because of the wild movements of |