1 Executive Summary 2 Why Option 2.1 Portfolio Protection 2.1.1 Application 1 2.2 Generate Additional Income on Your Portfolio 2.2.1 Application 2 2.3 Speculation/Leverage 3 A Brief History 3.1 Ancient Origins 3.2 Early Options in America 3.3 Chicago Board of Trade 3.4 Chicago Board Options Exchange (CBOE) 3.5 The Emergence of Put Trading 3.6 Other Exchanges Get Into the Game 3.7 Employee Stock Options 3.8 Exchange Traded Options 4 The Vocabulary of Options 4.1 Options 4.2 Call Option 4.3 Put Option 4.4 Option Buyer 4.5 Option Seller 5 What is a Call Option? 6 Options as an investment 7 Limited Downside Risk: 8 Option Expirations: 9 No Price Limits: 10 Variety of Strike Prices: 11 Quoting Option Prices: 12 What is a Put Option? 13 How Option Premiums are Determined 14 Selling Options 15 Option Strike Price 15.1 Strike Price and Option Premium 15.2 Time to Expiration 15.3 Volatility 16 Option Spread Trading 16.1 Directional Spreads 16.2 Volatility Spreads 17 Option Strike Price 17.1 Strike Price and Option Premium 17.2 Time to Expiration 17.3 Volatility 18 What is Delta? 19 What is Gamma? 20 What is Theta? 21 What is Vega? 22 Option Volatility 23 Protective Put Strategy 23.1 Market Opinion 23.2 When To Use 23.3 Benefit 23.4 Risk Vs Reward 23.5 Break Even Point(B.E.P) 23.6 Volatility 23.7 Time Decay 23.8 Alternatives before expiration 23.9 Alternatives at expiration 24 Long Call Strategy 24.1 Market Opinion 24.2 When To Use 24.3 Benefit 24.4 Risk Vs Reward 24.5 Break Even Point (B.E.P) 24.6 Volatility 24.7 Time Decay 24.8 Alternatives before Expiration 24.9 Alternatives at Expiration 25 Long Put Strategy 25.1 Market Opinion 25.2 When to Use 25.3 Benefit 25.4 Risk Vs Reward 25.5 Break Even Point (B.E.P) 25.6 Volatility 25.7 Time Decay 25.8 Alternatives before Expiration 25.9 Alternatives at Expiration 26 Married Put Strategy 26.1 Market Opinion 26.2 When To Use 26.3 Benefit 26.4 Risk Vs. Reward 26.5 Break Even Point (BEP) 26.6 Volatility 26.7 Time Decay 26.8 Alternatives before Expiration 26.9 Alternatives before Expiration 27 Covered Call 27.1 Market Opinion 27.2 When To Use 27.3 Benefit 27.4 Risk Vs Reward 27.5 Break Even Point(BEP) 27.6 Volatility 27.7 Time Decay 27.8 Alternatives before Expiration 27.9 Alternatives at Expiration 28 Cash Secured Put Strategy 28.1 Market Opinion 28.2 When To Use 28.3 Benefit 28.4 Risk Vs Reward 28.5 Break Even Point(BEP) 28.6 Volatility 28.7 Time Decay 28.8 Alternatives before Expiration 28.9 Alternatives at Expiration 28.10 Market Opinion 28.11 When To Use 28.12 Benefit 28.13 Risk Vs Reward 28.14 Break Even Point(BEP) 28.15 Volatility 28.16 Time Delay 28.17 Alternatives before Expiration 28.18 Alternatives at Expiration 29 Bear Put Spread 29.1 Market Opinion 29.2 When To Use 29.3 Benefit 29.4 Risk Vs Reward 29.5 Break Even Point (B.E.P) 29.6 Volatility 29.7 Time Decay 29.8 Alternatives before Expiration 29.9 Alternatives At Expiration 30 Collar 30.1 Market Opinion 30.2 When To Use 30.3 Benefit 30.4 Risk Vs Reward 30.5 Break Even Point (B.E.P) 30.6 Volatility 30.7 Time Decay 30.8 Alternatives before Expiration 30.9 Alternatives At Expiration 31 Option Pricing Model 31.1 Introduction 31.2 The Black and Scholes Model: 31.3 The Model 31.4 Assumptions of the Black and Scholes Model: 31.4.1 The stock pays no dividends during the option's life 31.4.2 European exercise terms are used 31.4.3 Markets are efficient 31.4.4 No commissions are charged 31.4.5 Interest rates remain constant and known 31.4.6 Returns are log normally distributed 31.5 Delta: 31.6 Gamma: 31.7 Theta: 31.8 Vega: 31.9 Rho: 31.10 Graphs of the Black and Scholes Model: 31.11 Call Premium versus Security Price 32 Vertical Credit Spreads 33 Covered Writing - A Way to Reduce Risk? 33.1 Generating extra income from a stock portfolio 34 Understanding Volatility 35 Choosing The Best Option Strategy 36 Using Options in an Investment Strategy 37 Learn how to use charts and other technical indicators to determine directional trade opportunities 37.1 Moving Averages 37.1.1 So how do you use a moving average when trading options? 37.2 What is Implied Volatility? 37.3 Support and Resistance Lines 37.4 Point and Figure(P & F) 37.5 Relative Strength and Industry Groups 37.6 Stochastic Oscillator 37.7 Stochastic Setups, OptionVue Style 37.7.1 Philosophy 37.7.2 Stochastic Environment 38 Trends, Highs & Lows 38.1 Distinguishing Reversals from Corrections (1) Impulse Vs. Drift 39 Distinguishing Reversals from Corrections (2) Volatility Expansion 39.1 Distinguishing Reversals from Corrections (3) Tests of Major Support and Resistance   The second type of event to be watched for / acted upon is a test of Major Support or Major Resistance. 40 Trading Strategy on tests of Resistance (Same logic inverted applies to tests of Support).   The correct trading strategy therefore includes alternatives based on what happens next:   Then watch which of the following occurs and act accordingly: 40.1.1     If not stopped-out as described above: 40.1.2   41 Simple rules' for Trading Futures

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