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- Herausgeber: Sankar Srinivasan FA
- Kategorie: Ratgeber
- Sprache: Englisch
Advanced Options Trading: A Practical Guide to Profiting from Stock / Index Options. Written by Sankar Srinivasan, a Certified Market Professional with over 20 years of experience at the National Stock Exchange of India.
Unlock the Secrets of Profitable Options Trading and Master Risk Management Like a Pro!
Are you ready to take your options trading skills to the next level? Advanced Options Trading: A Practical Guide to Profiting from Stock / Index Options is the ultimate guide for traders who want to maximize returns while minimizing risks. This book goes beyond the basics, covering proven options strategies, market psychology, risk-adjusted trading, and automated strategies tailored for today's fast-moving markets.
🔹 Who Is This Book For?
Intermediate and advanced traders looking for high-probability options strategies.
Investors who want to hedge portfolios using options.
Algorithmic traders interested in automated options trading.
Anyone who wants to increase profits while controlling risk in the stock market.
What You'll Learn in This Book:
✅ Market Psychology & Sentiment Analysis – Learn how trader behavior influences options pricing and how to use sentiment indicators to your advantage.
✅ Profitable Option Spreads – Master credit and debit spreads, butterfly spreads, calendar spreads, and ratio spreads to generate consistent income.
✅ Risk Management & Hedging Techniques – Protect your investments with protective puts, collars, and synthetic positions to reduce market risk.
✅ Multi-Leg Option Strategies – Use Iron Condors, Diagonal Spreads, and Straddles to capitalize on volatility and time decay.
✅ Earnings Trading Strategies – Trade pre-earnings volatility crush, straddles, and strangles to profit from market-moving events.
✅ Trading Options on Futures & Exotic Instruments – Explore options on commodities, indices, currencies, and exotic options like barrier and binary options.
✅ Automated Options Trading – Learn how to develop, backtest, and execute algorithmic trading strategies using powerful tools.
✅ The Art of Rolling Options – Understand rolling up, rolling down, and rolling out strategies to adjust losing trades into winners.
✅ Case Studies & Real-World Examples – Analyze both successful and failed trades to sharpen your decision-making skills.
✅ Building a Robust Trading Plan – Create a winning options trading blueprint with realistic goals, trade journaling, and market adaptability.
Take Your Options Trading to the Next Level!
If you're serious about making consistent profits in options trading, this book will give you the edge you need. Whether you're trading stocks, indices, or futures, this guide will help you navigate market volatility, hedge risks, and execute precision trades with confidence.
🎯 Scroll Up & Click "Buy Now" to Start Your Journey to Options Trading Mastery Today! 🚀
Updated on 18th Feb 2025 with python code for automated option trading.
Das E-Book können Sie in Legimi-Apps oder einer beliebigen App lesen, die das folgende Format unterstützen:
Seitenzahl: 101
Veröffentlichungsjahr: 2023
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Advanced Option Trading
Sankar Srinivasan
Published by Sankar Srinivasan, 2023.
While every precaution has been taken in the preparation of this book, the publisher assumes no responsibility for errors or omissions, or for damages resulting from the use of the information contained herein.
ADVANCED OPTION TRADING
First edition. July 19, 2023.
Copyright © 2023 Sankar Srinivasan.
ISBN: 979-8223677147
Written by Sankar Srinivasan.
10 9 8 7 6 5 4 3 2 1
Become a Independent Trader
Advanced Option Trading
A Practical Guide to Profiting from Stock / Index Options
Sankar Srinivasan
Certified Market Professional of National Stock Exchange of India
Copyright
While every precaution has been taken in the preparation of this ebook, the publisher assumes no responsibility for errors or omissions, or for damages resulting from the use of the information contained herein.
ADVANCED OPTION TRADING
Copyright © Sankar Srinivasan
All rights reserved. This ebook is licensed for your personal reading only. This e-book may not be re-sold or given away to other people. If you would like to share this ebook with another person, please purchase an additional copy for each recipient. Thank you for respecting the hard work of this author. Our Print Books and E-Books are available at all leading International online book stores & E-Book stores.
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Table of Contents
Advanced Option Trading 4
Introduction to Advanced Options Trading 4
Understanding Market Psychology and Sentiment 14
Advanced Options Greeks and Their Applications 20
Volatility Trading Strategies 25
Option Spreads for Profitable Trading 29
Options for Risk Management and Hedging 35
Advanced Earnings Strategies 41
Multi-Leg Options Strategies 48
Options on Futures and Exotic Instruments 53
Automated Options Trading 58
Automated Option Trading for Indian Option Traders 65
Python script to automate a NIFTY options 71
Backtest 75
Incorporate Options Greeks 80
The Art of Rolling Options 87
Automatic Rolling Decisions 93
Upgrading the Rolling Strategy with IV and Greeks 99
Add Stop Loss & Target Profit logic 102
Upgrading to a Trailing Stop Loss (TSL) Strategy 106
Taxation and Regulatory Considerations in Options Trading 110
Case Studies and Real-World Examples 116
Building a Robust Options Trading Plan 120
Conclusion: The Journey to Options Trading Success 126
Advanced Option Trading
Introduction to Advanced Options Trading
Options trading is one of the most powerful tools in the financial world. While many traders focus on stocks, futures, or forex, options offer unique advantages that can help maximize profits and minimize risks. In this chapter, explore the evolution of options trading, understand why professional traders rely on options, revisit the fundamental concepts of options, and debunk some of the common misconceptions about this fascinating market.
The Evolution of Options Trading
Options trading has been around for centuries. While it may seem like a modern financial tool, the concept of options dates back to ancient civilizations.
Early Beginnings in Ancient Greece
The first recorded use of options trading can be traced back to ancient Greece. A philosopher named Thales of Miletus used options to secure profits from olive oil. He predicted that the olive harvest would be abundant and paid a small fee to reserve the right to use olive presses in the future. When the harvest turned out to be bountiful, he leased the presses at a higher price and made a profit. This was an early form of call options, where someone pays a small amount for the right to buy something later at a fixed price.
The Amsterdam Stock Exchange and Tulip Mania (1600s)
During the 17th century, options trading became more structured in Amsterdam, which had one of the world's first stock exchanges. Traders used options to speculate on the prices of goods, including tulip bulbs. However, the market became highly speculative, leading to a financial bubble known as Tulip Mania. This was one of the first examples of how options could be both profitable and risky.
The Chicago Board Options Exchange (CBOE) and Modern Options Trading (1973-Present)
The biggest revolution in options trading happened in 1973 when the Chicago Board Options Exchange (CBOE) was established. This made options trading more accessible and standardized. Around the same time, financial experts Fischer Black and Myron Scholes introduced the Black-Scholes model, which helped traders calculate the fair value of options. Since then, options trading has grown significantly, with billions of contracts traded every year in various markets.
Why Options Are Essential for Professional Traders
Options provide traders with multiple advantages that make them a preferred choice among professionals. Below are some key reasons why experts rely on options:
Leverage: Control Large Positions with Less Money
Options allow traders to control a large number of shares with a small investment. For example, instead of buying 100 shares of a stock at $50 each (which costs $5,000), a trader can buy an options contract for just a few hundred dollars to gain exposure to the same 100 shares. This leverage helps traders amplify their returns while using less capital.
Hedging: Protecting Investments from Losses
Professional traders use options to hedge against losses. For example, if an investor owns shares of a company but is worried about a price drop, they can buy a put option to protect their investment. If the stock falls, the put option increases in value, reducing overall losses.
Generating Income: Making Money in Any Market Condition
Options can help traders earn money even in sideways markets by using strategies like covered calls and iron condors. Unlike stocks, which require price movement to make a profit, options allow traders to profit from time decay and volatility changes.
Flexibility: Profit from Rising, Falling, or Sideways Markets
Unlike stocks, which require prices to go up for profit, options traders can profit in all types of markets:
● Bullish market: Buy call options or sell put options.
● Bearish market: Buy put options or sell call options.
● Neutral market: Use spread strategies like iron condors to earn from time decay.
These features make options a powerful and flexible tool for professional traders.
Revisiting the Basics: Calls, Puts, Greeks, and Implied Volatility
What Are Call and Put Options?
Options are contracts that give the holder the right (but not the obligation) to buy or sell an asset at a specific price before a certain date.
● Call Option: The right to buy an asset at a fixed price before expiration. Traders buy calls when they expect the price to go up.
● Put Option: The right to sell an asset at a fixed price before expiration. Traders buy puts when they expect the price to go down.
Example:
If a stock is trading at $100, a call option with a $105 strike price allows the trader to buy the stock at $105 before expiration, regardless of the actual market price. If the stock rises to $120, the trader profits from the difference.
Understanding the Greeks: Key Risk Factors in Options Trading
Options pricing depends on several factors, known as Greeks. These measure how an option’s price changes due to market movements.
● Delta (Δ): Measures how much the option’s price changes when the stock price moves $1. A delta of 0.50 means the option price increases by $0.50 for every $1 move in the stock.
● Gamma (Γ): Measures how much delta changes with stock price movement. Higher gamma means higher risk.
● Theta (Θ): Measures time decay. As expiration approaches, options lose value. Traders who sell options benefit from theta.
● Vega (ν): Measures sensitivity to volatility. If volatility increases, option prices rise.
● Rho (ρ): Measures sensitivity to interest rates (less important in short-term trading).
Implied Volatility: The Secret Behind Option Prices
Implied volatility (IV) represents the market’s expectations of future price movement. When IV is high, options are expensive. When IV is low, options are cheap. Traders use IV to find mispriced options and identify potential trades.
Example:
If IV is high before earnings, option prices increase due to uncertainty. After earnings, IV drops, and option prices decline—a phenomenon known as IV crush.
Common Misconceptions About Options Trading
"Options Are Too Risky"
While options can be risky if used improperly, they can also be safer than stocks. Strategies like covered calls and protective puts reduce risk. Options offer more control over risk than stocks.
"You Can Lose More Than You Invest"
This is true only for naked option selling. However, buying options has limited risk—traders can only lose the premium paid. Additionally, risk-defined strategies like spreads limit potential losses.
"Options Are Only for Experts"
Beginners can start with simple strategies like covered calls and cash-secured puts before moving to advanced techniques. Learning the basics makes options trading easier.
"You Must Predict the Market Direction to Win"
Some options strategies profit even if the stock stays still. Strategies like iron condors and credit spreads make money from time decay, not price movement.
A comparison table that corrects common myths:
Myth
Reality
Options are too risky
Options can be used for risk management (protective puts, covered calls)
You can lose unlimited money
Only naked selling has high risk; buying options has limited risk
Options are only for experts
Beginners can start with simple strategies like covered calls
You must predict market direction
Some strategies, like iron condors, profit without price movement
Options trading has a rich history and continues to evolve as technology and market strategies advance. Professional traders rely on options for leverage, risk management, and income generation. Understanding calls, puts, Greeks, and implied volatility is essential for success. While many fear that options are too risky, proper knowledge and strategy can turn them into a powerful tool for consistent profits.
Real-World Trade Examples for Options Trading
Let’s analyze real-world examples using popular stocks like Tesla (TSLA) and Apple (AAPL).
Example 1: Buying a Call Option on Tesla (TSLA) 🚀
📌 Scenario: Imagine Tesla (TSLA) is trading at $200 per share, and you believe it will rise to $220 in the next 30 days. Instead of buying 100 shares (which costs $20,000), you decide to buy a call option.
📊 Trade Details:
● Call Option Strike Price: $210
● Expiration: 30 days
● Option Price (Premium): $5 per contract
📈 Outcome 1 (Tesla Rises to $220 🚀)
● Your call option is now worth $10 per contract ($220 - $210).
📉 Outcome 2 (Tesla Falls to $190 😞)
● Your call option expires worthless (you lose the $500 premium).
● But if you had bought the stock, your loss would be $1,000 instead of just $500!
✅ Lesson: Options reduce risk and offer high leverage with limited loss.
Example 2: Selling a Covered Call on Apple (AAPL) 🍏
📌 Scenario: You own 100 shares of Apple (AAPL), currently trading at $150 per share. You believe the price won't go above $160 in the next month. You decide to sell a covered call to earn extra income.
📊 Trade Details:
● Stock Owned: 100 shares of AAPL at $150
● Call Option Sold: $160 strike price
● Premium Collected: $3 per contract
📈 Outcome 1 (Apple Stays Below $160 🤷♂️)
● The call option expires worthless, and you keep the $300.
● You still own the 100 shares of AAPL, plus the extra $300 profit.
📉 Outcome 2 (Apple Rises Above $160 🚀)
● The buyer exercises the option and buys your shares at $160.
● You sell 100 shares at $160, making a $1,000 gain ($160 - $150).
✅ Lesson: Covered calls allow you to earn income from stocks you already own, even in a sideways market.
Example 3: Protecting Your Portfolio with a Put Option (Hedging) 🛡️
📌 Scenario:
You own 100 shares of Amazon (AMZN) at $130 per share. You are worried about a potential market crash but don’t want to sell your stock.
📊 Trade Details:
