Option trading in a nutshell

Options Trading in a Nutshell: The Complete Beginner's Guide to Trading Options.

by John Ondercin.

- Why, despite what you may have heard to the contrary, Options Trading can be one of the safest forms of trading.

- The two key reasons why Options are a smarter investment than purchasing shares outright.

- The simple formula that even Math dunces can use to calculate the value of Options.

- Examples of Options trades and a step-by-step guide on how to calculate their value.

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Options Trading in a Nutshell.

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Publisher's Summary.

Options Trading in a Nutshell: The Complete Beginner’s Guide to Trading Options is everything you need to know to grasp the basics of options trading, including easy-to-understand explanations of "calls," "puts," and other relevant "trading lingo".

This audiobook includes a full set of quizzes and exercises to ensure you've understood all the components of this exciting branch of trading.

Inside you'll also discover.

Free access to a complete set of training videos on how to make wise investments. Why, despite what you may have heard to the contrary, Options Trading can be one of the safest forms of trading. The two key reasons why Options are a smarter investment than purchasing shares outright. The simple formula that even Math dunces can use to calculate the value of Options. Examples of Options trades and a step-by-step guide on how to calculate their value.

John Ondercin is the Chief Trading Strategist at InvestToSuccess. A full-time trader since 1999, his books include Trading Stock Options the Easy Way and numerous courses on day trading and advanced Options strategies. His focus is on protecting your portfolio while providing monthly cash flow. Mr. Ondercin has been teaching his strategies since 2005 to both new and institutional traders in 53 countries around the world.

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Narrator.

What members say.

Average Customer Ratings.

Performance.

BN 04-06-15.

Helpful for beginners.

I listened to this audio book after taking some option trading courses and found this to be an extremely good summary of important details needed for trading.

2 of 2 people found this review helpful.

Spot on!

A step by step process, allowing you to get your game on track.

1 of 1 people found this review helpful.

As advertised for beginners.

A quick introduction to options trading for beginners it provides a summary of the basic terminology and wets your appetite to learn more.

1 of 1 people found this review helpful.

Ok for basic understanding.

Ok for basic understanding and theory on the buy side. Not much mentioned on the sell side of things.

Great Overview.

Good for what it is, learned the main idea and some. Brief quick summary.

True beginner guide.

Definitely very basic beginner info. Don't expect to learn any strategies or more advanced terms. Great for the absolute novice.

Rusty California 04-18-16.

Good Beginner Book.

This definitely brings it down to a beginner level. Does a great job of introducing the topic to diving into real instruction.

Way to basic.

Does not go over Greeks or strategies. All it does is say what a option is. If you're even looking at options you probably know what a call and a put is and that's all this book is. I listened to the whole thing in two hours and it was a waste of time and money.

Theresa Ryan Ventura, CA 02-22-16.

Way too short.

This was such a cursory primer on options it was laughable. It was way too short and didn't cover anything but outs and calls. Useless.

Bemster North Bend, Ohio United States 11-04-15.

Spam mail is bad from this company website.

What disappointed you about Options Trading in a Nutshell?

Do not go to their website for free add-on. You will get constant spam mail.

Book Excerpt: Options Trading In A Nutshell (Chapter One)

John Ondercin, the Chief Trading Strategist at InvestToSuccess, shares his views on why he prefers trading options to buying stocks in his book, “ Options Trading in a Nutshell “. Read an excerpt below.

From Chapter One – Why Options Trading?:

Given my focus on safe, smart, sound trading, you’d be forgiven for wondering why I’m recommending Options trading as a strategy.

If you’re new to the subject you may only have heard that they’re a very risky strategy.

Well, in the interests of full disclosure, they certainly can be…

But only if you’re greedy.

Or have been taught how to utilize them very, very badly.

You see, a lot of people use Options trading to try to make extra cash on top of their wins. It’s as if they’re chasing the cherry on top of the icing on top of the cake, without any regard for the fact that they could be about to drop the whole thing onto the kitchen floor.

If, however, you approach Options trading properly, they actually expose you to LESS risk because your losses are automatically limited.

To understand why this is the case, you first of all need to understand what Options are.

We’re going to look at specific examples very soon but here’s the basic definition:

An “Option” is a contract that gives you the right, but not the obligation, to buy or sell shares at a specific price.

When you purchase an Option (which is sometimes referred to as an “Option Contract,” or even just a “Contract”), instead of buying or selling shares outright, you have the right to buy or sell shares, but you are not forced to exercise that right.

If the share price moves to a point that’s going to make you a profit, you can decide to exercise your Option (which basically means to buy or sell shares at an agreed price).

If the share price never goes to where you want it to, you can decide not to exercise your Option.

But why would you want to purchase an Option instead of just buying the shares outright?

It usually costs a heck of a lot less to buy Options than it does to buy the shares.

I’m talking pennies on the dollar.

And, if the share price moves in the right direction, your profits are almost the same.

I could spend a hundred dollars on an Option and make almost the same amount of money as someone who’s spent $10,000 to buy the shares outright.

Because the cost of an Option is usually a fraction of the cost of the shares, I’m risking less money than someone who purchases the shares.

Imagine, for instance, that I spend hundred dollars on an Option and, overnight, the share price drops by 50%.

The person who spent $10,000 on shares has just lost $5,000.

But I can just decide not to use my Option and all I’ve lost is my hundred dollars.

What if there was a really bad crash and the share price dropped to zero?

The owner of shares has now lost his entire investment of $10,000.

But I’ve still only lost one hundred dollars.

Reread those two reasons as many times as you need to get your head around this concept.

Because, if you understand the value of leverage and limiting risk, you understand how and why Options trading represents such an incredibly attractive opportunity!

Now, you might be thinking that this all sounds a little bit too good to be true.

Surely there has to be a catch.

Or, put another way, surely there has to be some element of risk.

You see, an Option always comes with an expiration date.

It could be a few days, it could be a year, but once the Option has expired your chance to participate in that stock has gone and you’ve lost the money you spent.

Let’s say, for instance, that the share price doesn’t make any significant movement, up or down. Our $10,000-spending friend has lost nothing and he can still sell his shares and break even.

But my hundred dollars is gone for good.

So, yes, like every trading strategy, there is still an element of risk. If the risk level was zero, everyone would do this kind of trading and nothing else.

But the important thing to note is that the risk level is still low because the investment is significantly smaller.

I don’t know about you but, if I have the choice of risking either $100 or $10,000 and the potential profits are very similar, I’m going to take the hundred dollars option every time.

And here’s the cool bit.

If I don’t think an Option I’ve purchased is going to be profitable, I can sell it before the expiration date and make some of my money back.

I won’t get my full hundred dollars back but I’ll usually be able to get something for it and this reduces my loss even further.

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Copyright © Invest To Success LLC dba WINvesting. All Rights Reserved Worldwide.

U. S. Government Required Disclaimer: Stock, options, futures, and Forex trading is not appropriate for everyone. While there is a potential for large rewards, there is also a substantial risk of loss associated with trading. Losses can and will occur. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell stocks, options, futures, and/or currencies. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using these methodologies or systems or the information in this message will generate profits or ensure freedom from losses.

Success Stories, testimonials, and similar statements about success (referred to as a "Success Story" or "Success Stories") are individual experiences by persons who have used our services in some way or other. Although Success Stories are accepted from students and customers in good faith, Invest To Success has not independently examined the business records of any of the Success Story providers and therefore has not verified any specific figures or results quoted therein. Success Stories may be edited for clarity or brevity. The results indicated in any Success Story are not necessarily representative of the results of those who will use Invest To Success Products. These results are not typical, and your income or results, if any, will vary. Your results may be better or worse.

Book Excerpt: Option Greeks In A Nutshell (Chapter One)

Editor’s Note: John Ondercin, the Chief Trading Strategist at InvestToSuccess, in his book, “Option Greeks In A Nutshell“, introduces the concept of Option Greeks and explains why they are essential for Option trading success. Read an excerpt below.

From Chapter One – What Are The “Greeks” And How Can They Help You?:

The most important thing you need to know about the Greeks is…

Calculating them is hideously complicated, but USING them is ridiculously easy.

Fortunately, all the complex calculations needed for the Greeks are done automatically in your broker’s trading software. As long as you know basic addition, subtraction, and multiplication (or at least have a simple calculator handy), you’re good to go.

(NOTE: If you don’t have an Options broker, go to //investtosuccess/resources/brokers to see our current list of recommended brokers.)

There are five main Greeks when it comes to Options trading:

However, when it comes to most strategies for Options trading, you really only need to focus on two of them: Delta and Theta. These are the two Greeks that provide the most significant information about the types of Options trades you should be focusing on, and so it’s these two Greeks that we’re going to spend the most time on.

For the sake of completeness, here’s how the Greeks affect your Options trading, as well as an overview of the five main Greeks used in trading.

How Do The Greeks Impact Your Options Trading?

A common misconception is that the Greeks tell you how much an Option is GOING to change in the future. What they actually tell you is how much an Option is EXPECTED to change in the future.

It’s a subtle difference, but an important one.

As nice as it would be, Greeks won’t tell you whether the value of an Option is going to go up or down; all it can show is how much the value of an Option is going to change when the market moves.

So, here’s the simple, easy to remember definition:

If the market moves in your favor, the Greeks tell you how much profit you’re likely to make as a result.

There are lots of strategic ways to use the Greeks, depending on the trading model that you’re using, but the simplest and most common usage is to help you to decide when to get in and when to get out.

For example, if the Greeks say that a small movement in your favor will result in a large profit, then you may decide to jump in. But if the Greeks say that a small movement in your favor is only going to result in a tiny profit, then you may decide that the risk isn’t worth the potential rewards.

If you’re thinking that the Greeks sound a bit like gambling odds, you’re not far off. The difference is that the Greeks aren’t weighted in favor of the house; they’re an impartial estimate that allows you to measure risk with a high degree of accuracy.

This figure indicates how much the price of an Option is expected to change if the stock price moves by $1. There are other factors in play so Delta is only ever an estimate. For our purposes, though, it’s accurate enough to be a highly valuable calculation.

This number shows the amount by which Delta will change if the stock price moves by $1. Think of it as a measure of acceleration. A high Gamma means the Delta is likely to rise quickly if the market moves the right way. A low Gamma means the Delta is only going to increase slowly or even remain the same.

What’s that? Vega isn’t a Greek letter? Good catch, Mr. Trivia Expert. When it comes to Options trading, though, it’s still considered a Greek. Vega is an indication of how much the asking price of an Option will change if the level of volatility of the stock changes. Remember, stock volatility affects the movement of the share price both up and down, so Vega can be used to assist decisions on both Calls and Puts.

Theta (time)

This calculation measures how much the value of an Option will change over time. If you own a long-term Option, for example, this number will usually indicate a very small change. However, as the Option nears the expiration date, the rate of change will be much higher as the value of the Option rapidly decreases.

Last (and in my opinion, least) this is the Greek that measures the change in an Option’s value if interest rates change. Because interest rates tend to adjust in very small increments, this measurement is only somewhat useful for very long-term Option positions.

If we were so inclined, we could spend days discussing each Greek individually, but by the end of it, I can guarantee that your head would be bursting with information, 90% of which would be useless and counterproductive for all but the most advanced trading strategies.

My philosophy on teaching Options trading is to start simple and work your way up in complexity once you’re familiar and comfortable with the basics. So, in this book, we’re going to focus primarily on Delta and Theta and how they can assist you in the vast majority of your buying and selling strategies.

Don’t worry about trying to understand all the tiny details at this stage. My goal is to get you factoring Delta and Theta into your trading decisions so that, further down the line, when you’re ready to start considering more advanced concepts, the experience you’ve gained with using the Greeks will give you a massive head-start.

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Copyright © Invest To Success LLC dba WINvesting. All Rights Reserved Worldwide.

U. S. Government Required Disclaimer: Stock, options, futures, and Forex trading is not appropriate for everyone. While there is a potential for large rewards, there is also a substantial risk of loss associated with trading. Losses can and will occur. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell stocks, options, futures, and/or currencies. No system or methodology has ever been developed that can guarantee profits or ensure freedom from losses. No representation or implication is being made that using these methodologies or systems or the information in this message will generate profits or ensure freedom from losses.

Success Stories, testimonials, and similar statements about success (referred to as a "Success Story" or "Success Stories") are individual experiences by persons who have used our services in some way or other. Although Success Stories are accepted from students and customers in good faith, Invest To Success has not independently examined the business records of any of the Success Story providers and therefore has not verified any specific figures or results quoted therein. Success Stories may be edited for clarity or brevity. The results indicated in any Success Story are not necessarily representative of the results of those who will use Invest To Success Products. These results are not typical, and your income or results, if any, will vary. Your results may be better or worse.