28 lines
1.7 KiB
Plaintext
28 lines
1.7 KiB
Plaintext
141
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Part III
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IntellIgent OptIOn
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InvestIng
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Now that you understand how options work and how to value companies,
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it is time to move from the theoretical to the practical to see how to apply
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this knowledge to investing in the market. With Part III of this book, we
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make the transition from theoretical to practical, and by the time you finish
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this part, you will be an intelligent option investor.
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To invest in options, you must know how to transact them; this is the
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subject of Chapter 7. In it, you will see how to interpret an option pricing
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screen and to break down the information there so that you can under -
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stand what the option market is predicting for the future price of a stock. I
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also talk about the only one of the Greeks that an intelligent option investor
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needs to understand well—delta.
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Chapter 8 deals with a subject that is essential for option investors—
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leverage. Not all option strategies are levered ones, but many are. As such,
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without understanding what leverage is, how it can be measured and used,
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and how it can be safely and sanely incorporated into a portfolio, you can-
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not be said to truly understand options.
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Chapters 9–11 deal with specific strategies to gain, accept, and mix
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exposure. In these chapters I offer specific advice about what strike prices
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are most effective to select and what tenors, what to do when the expected
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outcomes of an investment materially change, and how to incorporate
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each strategy into your portfolio. Chapter 11 also gives guidance on so-
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called option overlay strategies, where a position in a stock is overlain by
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an option to modify the stock’s risk-reward profile (e.g., protective puts for
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hedging and covered calls for generating income). |