Conservative Options Trading

Hedging Strategies, Cash Cows, and Loss Recovery

Michael C. Thomsett

• Publisher: Business Expert Press
• Year: 2020
• ISBN:
  9781951527136
• Topic: Business
• Subtopic: Financial Risk Management
• Index: Business

The world of options is considered high-risk by many. At its original options treading in the modern era began in the early 1970s when the first listed calls were offered on a short list of companies; a few years later, put trading was added.

Since this time, options trading has become available on most companies on the large public exchanges. However, the high-risk reputation of options has persisted through the years, even as dozens of new and often conservative strategies have been introduced. Today, the best use of options is not to speculate on price movement, but to hedge market risk in equity portfolios. Many strategies can combine hedging with income, establishing advantageous circumstances for risk-averse traders. It is possible to apply several strategies to reduce risk and in some instances, to eliminate market risk completely.

This book examines the many ways this can be accomplished, based on options for three highly-rated companies. These are qualified as a first step by exceptionally attractive fundamental attributes and trends: Higher than average dividend yield with dividend increases over at least 10 years; a range of moderate price/earnings ratios each year; growing revenue, earnings and net return; and level or declining long-term debt as a percentage of total capitalization.

CHAPTER 1

Setting the Ground Rules

This book explains how conservative investors can employ options strategies to (a) enhance current income without increasing market risks; (b) protect long positions through options used for insurance; and (c) create a form of contingency to survive in volatile market conditions.

The Ground Rules

Since you are a conservative investor, the arguments in this book are based on a series of underlying assumptions. These relate to your risk profile and to your investing philosophy. Five underlying assumptions are used in this book:

1. You will limit options activities...

Table of contents

• 00_FM
• 01_Chapter 1
• 02_Chapter 2
• 03_Chapter 3
• 04_Chapter 4
• 05_Chapter 5
• 06_Chapter 6
• 07_Chapter 7
• 08_Chapter 8
• 09_Chapter 9
• 10_Chapter 10
• 11_Chapter 11
• 12_Chapter 12
• 13_Chapter 13
• 14_Appendix
• 15_Glossary
• 16_Answers to Que
• 17_ATA
• 18_Index
• 19_Ad-Page