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