eBook 2: Introduction to Advanced Options Spreads

Table of Contents
 
Introduction to Advanced Options Spreads - Pages 6 - 15
 
I. Rationale for Trading Options Spreads - to allocate risk among market movement, changes in implied volatility, and time decay
     (a) Spread structure determines risk allocation
     (b) Objective is to initiate an options spread that matches your market outlook
 
II. Implied Volatility (IV) versus Statistical Volatility (SV)
     (a) Undervalued options - price < value; IV% < SV%; IV Pctl < 50
     (b) Overvalued options - price > value; IV% > SV%; IV Pctl > 50
 
III. OptionVue Analytical Software
     (a) Price & Volatility Chart
     (b) Matrix
     (c) Graphic Analysis
 
IV. The Greek Variables
     (a) Delta
     (b) Gamma
     (c) Theta
     (d) Vega
 
Directional Strategies - Premium Buying (Long Premium) Spreads - Pages 16 - 36
 
I. Vertical Debit Spreads
     (a) Bull Call Spread
     (b) Bear Put Spread
 
II. Calendar Spreads
     (a) Bullish OOM Call Calendar Spread
     (b) Bearish OOM Put Calendar Spread
 
III. Diagonal Calendar Spreads
     (a) Bullish Diagonal Calendar Call Spread
     (b) Bearish Diagonal Calendar Put Spread
 
IV. Ratio Backspreads
     (a) Call Ratio Backspread
     (b) Put Ratio Backspread
 
V. Vertical Swaps
     (a) Bullish Vertical Call Swap
     (b) Bearish Vertical Put Swap
 
Directional Strategies - Premium Selling (Short Premium) Spreads - Pages 37 - 57
 
I. Vertical Credit Spreads
     (a) Bear Call Spread
     (b) Bull Put Spread
 
II. Reverse Calendar Spreads
     (a) Bearish OOM Call Reverse Calendar Spread
     (b) Bullish OOM Put Reverse Calendar Spread
 
III. Reverse Diagonal Calendar Spreads
     (a) Bearish Diagonal Calendar Call Spread
     (b) Bullish Diagonal Calendar Put Spread
 
IV. Ratio Spreads
     (a) Call Ratio Spread
     (b) Put Ratio Spread
 
V. Vertical Swaps
     (a) Bearish Vertical Call Swap
     (b) Bullish Vertical Put Swap
 
Non-Directional (Delta Neutral) Implied Volatility Strategies - Hedged (Covered) Spreads (forecasting implied volatility, not market direction) - Pages 58 - 77
 
I. Long ATM Straddle
 
II. Long Strangle

III. Dual Ratio Backspread
 
IV. ATM Calendar Spreads
     (a) ATM Call Calendar Spread
     (b) ATM Put Calendar Spread
 
V. ATM Reverse Calendar Spreads
     (a) ATM Reverse Call Calendar Spread
     (b) ATM Reverse Put Calendar Spread
 
VI. Reverse Strangle Swaps
     (a) Positive Vega
     (b) Negative Vega
     (c) Neutral Vega
 
Non-Directional (Delta Neutral) Implied Volatility Strategies - Naked (Uncovered) Spreads (forecasting implied volatility, not market direction) - Pages 78 - 91
 
I. Short ATM Straddle
 
II. Short Strangle
 
III. Dual Ratio Spread
 
Statistical Volatility Strategies (forecast a range where you expect the market will be) - Pages 92 - 110
 
I. Neutral Strategies
     (a) ATM Iron Butterfly
     (b) Close-to-the-Money Iron Condor
 
II. Bullish Strategies
     (a) OOM Call Butterfly
     (b) OOM Call Condor
 
III. Bearish Strategies
     (a) OOM Put Butterfly
     (b) OOM Put Condor
 
Strategies Not Affected by Implied Volatility - Pages 111 - 125
 
I. ATM Iron Butterfly Swap
     (a) Front month Iron Butterfly along with deferred month Reverse Iron Butterfly - positive theta and negative gamma - Bearish Vertical Call Swap along with Bullish Vertical Put Swap
     (b) Front month Reverse Iron Butterfly along with deferred month Iron Butterfly - negative theta and positive gamma - Bullish Vertical Call Swap along with Bearish Vertical Put Swap
 
II. Iron Condor Swap
     (a) Front month Iron Condor along with deferred month Reverse Iron Condor - positive theta and negative gamma - Bearish Vertical Call Swap along with Bullish Vertical Put Swap
     (b) Front month Reverse Iron Condor along with deferred month Iron Condor - negative theta and positive gamma - Bullish Vertical Call Swap along with Bearish Vertical Put Swap