options

vii Coulda Woulda Shoulda
PREFACE
Note: Hard Cover Printed in Color upgraded version of this Book
called: “Options Trading: The Hidden Reality” available at
www.riskdoctor.com/books.html.
Highlights of what “The Hidden Reality” has that Coulda Woulda Shoulda (CWS) did
not:
Chapter 1 – More clarification and Color Illustrations
Chapter 3 – 2D and 3D Graphs of the Greeks from Options: Perception and Deception
(O:PD)
Chapter 4 – Graphic Illustrations for Gamma Scalping
Chapter 5 – Graphs of the Greeks for Verticals and More on Legging Spreads
Chapter 6 – 2D and 3D Graphs of the Greeks for Butterflies, Butterfly Dissection, Skip-
Strike-Flies
Chapter 7 – Graphics and Dissection of Diagonals, Double Diagonals, Straddle Strangle
Swaps and Double Calendars
Chapter 9 – Hybrid Hedge (Adapted from Slingshot Article)
Chapter 10 – O:PD’s Skew Library Chapter
Appendix for Chapter 2’s Option Metamorphosis showing all dissections.
WHY ANOTHER OPTIONS BOOK?
This book is the revision of Options: Perception and Deception which
was geared towards professional Market Makers who trade their own
account. Market Makers look at positions differently. Most people
reading this book know something about puts and calls. To be able to
trade puts and calls, one needs a full grasp of the concepts. The market
takes no prisoners. It simply kills those who do not have enough
knowledge and are slow to make decisions.
Try to solve the following exercise in less than 60 seconds. (In live
audience presentations over 90% get the answer wrong.)
Exercise: What amount of money is the most that one can lose
with the following position?
QQQQ is trading at 37.30,
The 36 call is going for 1.70 and
The 39 put is going for 1.90.
A trader buys ten of each. Obviously, this is a good position if there is a
large move in either direction but what is the worst-case scenario?
Owning ten calls at 1.70 and ten puts at 1.90 is 3.60 ten times making a
total investment of $3600 (10 x (1.70 + 1.90) x 100 shares).
©2001 Charles M. Cottle RiskDoctor@RiskDoctor.com