September 8, 2011 – Options for the Beginner


3) Options for the Beginner. I strongly urge readers of this letter to log on to Amazon and by a copy of Options for the Beginner and Beyond by W. Edward Olmstead. Options contracts offer investors a wonderful instrument for minimizing risk, while maximizing the upside, and I am going to recommend many more such strategies in the future. So, if you want to have the slightest idea of what I am talking about, get yourself some grounding in this important field by reading this book. You don't have to be a math genius to figure this stuff out, and the risk reward benefits are great.

Olmstead, a math professor at Northwestern University, starts out with a basic Options 101 course, going into the merits of puts and calls. He catalogues the exchanges where they are listed, and the vast number of products that can be traded, including stocks, bonds, commodities, currencies, and precious metals. He goes into the mundane, but important details on the administration side of things, such as settlements. For the more technically inclined, he launches into options theory pricing, and goes into the origins and utility of the Black-Scholes equation. We learn about the arcane world of what traders call 'the Greeks', the deltas, thetas, and vegas of individual positions. He then launches into basic option strategies, like call and put spreads, ratios, straddles, strangles, collars, and condors.

Don't let these terms scare you off. It is really much easier than it sounds. In fact, you will be kicking yourself once you find out how easy it is. In order to buy the book at a discounted price and give yourself a genuine trading edge, just click here.