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Book Description

The world of options is considered high-risk by many. At its original options treading in the modern era began in the early 1970s when the first listed calls were offered on a short list of companies; a few years later, put trading was added.

Since this time, options trading has become available on most companies on the large public exchanges. However, the high-risk reputation of options has persisted through the years, even as dozens of new and often conservative strategies have been introduced. Today, the best use of options is not to speculate on price movement, but to hedge market risk in equity portfolios. Many strategies can combine hedging with income, establishing advantageous circumstances for risk-averse traders. It is possible to apply several strategies to reduce risk and in some instances, to eliminate market risk completely.

This book examines the many ways this can be accomplished, based on options for three highly-rated companies. These are qualified as a first step by exceptionally attractive fundamental attributes and trends: Higher than average dividend yield with dividend increases over at least 10 years; a range of moderate price/earnings ratios each year; growing revenue, earnings and net return; and level or declining long-term debt as a percentage of total capitalization.

Table of Contents

  1. Introduction
  2. Chapter 1 Setting the Ground Rules
  3. Chapter 2 Option Basics
  4. Chapter 3 Options in Context
  5. Chapter 4 Chart-Based Analysis
  6. Chapter 5 Managing Profits and Losses
  7. Chapter 6 Options as Cash Generators
  8. Chapter 7 The 1-2-3 Iron Butterfly
  9. Chapter 8 The Dividend Collar
  10. Chapter 9 Alternatives to Stock Purchase
  11. Chapter 10 Option Strategies in Down Markets
  12. Chapter 11 Risk Evaluation Techniques
  13. Chapter 12 What Is Next?
  14. Chapter 13 Stock Selection and the Option Contract
  15. Appendix
  16. Glossary
  17. Answers to Questions and Exercise for Discussion
  18. About the Author
  19. Index
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