exiting, 118trading, 114–118Bear Put spread strategy, 32Bear Put spreadsexiting, 98trading, 95–99Bull Put Ladder strategy, 104exiting, 108trading, 104–108Bull Put spread strategy, 28–32
345
346
Index
puts (Contd.)buying, 4Calendar Put strategy, 70exiting, 73trading, 70–75Collar strategy, 240exiting, 245trading, 241–245Covered Put strategy, 83exiting, 86trading, 83–87Covered Short Straddle strategy, 46–51Covered Short Strangle strategy, 51exiting, 56trading, 52–56Diagonal Put strategy, 76exiting, 79trading, 76–82longselling, 16trading, 13Long Box strategy, 287exiting, 290trading, 287–291Long Combo strategy, 279exiting, 282trading, 279–282Long Iron Butterfly strategy, 37exiting, 40trading, 37–41Long Iron Condor strategy, 41–45Long Put Butterfly strategy, 193exiting, 197trading, 194–197Long Put Condor strategy, 203exiting, 207trading, 203–207Long Put Synthetic Straddle strategy,258exiting, 262trading, 259–263Long Synthetic Future strategy, 271exiting, 274trading, 272–274married (taxation), 299Modified Put Butterfly strategy, 212exiting, 216trading, 213–217
Put Ratio Backspread strategy, 224exiting, 227trading, 225–229Ratio Put Spread strategy, 233exiting, 237trading, 234–238shortbuying, 20trading, 16–19Short Call Synthetic Straddle strategyexiting, 270trading, 267–271Short Combo strategy, 283exiting, 286trading, 283–286Short Iron Butterfly strategy, 166Short Put Butterfly strategy, 152exiting, 156trading, 153–156Short Put Condor strategy, 161exiting, 165trading, 162–165Short Synthetic Future strategy, 275exiting, 278trading, 275–278strike price. See strike priceSynthetic Put strategy, 250exiting, 253trading, 251–254writing, 4
Q–Rqualified status of Covered Calls(taxation), 299ratio backspreads. See backspreadsRatio Call Spread strategy, 229exiting, 232trading, 229–233Ratio Put Spread strategy, 233exiting, 237trading, 234–238rationalefor Bear Call Ladder strategy, 110for Bear Call spread strategy, 33for Bear Put Ladder strategy, 115for Bear Put spreads, 96for Bull Call Ladder strategy, 100
Index
for Bull Call spreads, 91for Bull Put Ladder strategy, 105for Bull Put spread strategy, 29for Calendar Call strategy, 58for Calendar Put strategy, 71for Call Ratio Backspread strategy, 221for Collar strategy, 242for Covered Call strategy, 24–25for Covered Put strategy, 84for Covered Short Straddle strategy, 48for Covered Short Strangle strategy, 53for Diagonal Call strategy, 65for Diagonal Put strategy, 77for Guts strategy, 144for Long Box strategy, 288for Long Call Butterfly strategy, 190for Long Call Condor strategy, 199for Long Call Synthetic Straddlestrategy, 255for Long Combo strategy, 279for Long Iron Butterfly strategy, 38for Long Iron Condor strategy, 42for Long Put Butterfly strategy, 194for Long Put Condor strategy, 204for Long Put Synthetic Straddlestrategy, 260for Long Synthetic Future strategy, 272for Modified Call Butterfly strategy, 209for Modified Put Butterfly strategy, 214for Put Ratio Backspread strategy, 225for Ratio Call Spread strategy, 230for Ratio Put Spread strategy, 234for Short Call Butterfly strategy, 149for Short Call Condor strategy, 158for Short Call Synthetic Straddlestrategy, 264for Short Call Synthetic strategy, 268for Short Combo strategy, 283for Short Guts strategy, 186for Short Iron Butterfly strategy, 167for Short Iron Condor strategy, 171for Short Put Butterfly strategy, 153for Short Put Condor strategy, 162for short put strategy, 17for Short Straddle strategy, 178for Short Strangle strategy, 182for Short Synthetic Future strategy, 275for Straddle strategy, 123
for Strangle strategy, 128for Strap strategy, 139for Strip strategy, 134for Synthetic Call strategy, 247for Synthetic Put strategy, 251rewardBear Call strategy, 34Bull Put strategy, 30Calendar Call strategy, 58Calendar Put strategy, 71Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 48Covered Short Strangle strategy, 53Diagonal Call strategy, 65Diagonal Put strategy, 77Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43riskBear Call Ladder strategy, 111Bear Call spread strategy, 34Bear Put Ladder strategy, 116Bear Put spreads, 97Bull Call Ladder strategy, 102Bull Call spreads, 92Bull Put Ladder strategy, 106Bull Put spread strategy, 30Calendar Call strategy, 58Calendar Put strategy, 71Call Ratio Backspread strategy, 222Collar strategy, 243Covered Call strategy, 25–26Covered Put strategy, 85Covered Short Straddle strategy, 48–49Covered Short Strangle strategy, 53Diagonal Call strategy, 65Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 289Long Call Butterfly strategy, 191Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38–39Long Iron Condor strategy, 43–44Long Put Butterfly strategy, 195Long Put Condor strategy, 205
347
348
Index
risk (Contd.)Long Put Synthetic Straddlestrategy, 261Long Synthetic Future strategy, 273Modified Call Butterfly strategy, 210Modified Put Butterfly strategy, 215profile charts, 1profile lines, 2Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 231Ratio Put Spread strategy, 235Short Call Butterfly strategy, 150Short Call Condor strategy, 159Short Call Synthetic Straddlestrategy, 265Short Call Synthetic strategy, 269Short Combo strategy, 284Short Guts strategy, 187Short Iron Butterfly strategy, 168Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276Straddle strategy, 124Strangle strategy, 130Strap strategy, 140Strip strategy, 135Synthetic Call strategy, 248Synthetic Put strategy, 252Rule of the Opposites, 3
Sselectionof optionsBear Call Ladder strategy, 111Bear Call spread strategy, 34Bear Put Ladder strategy, 116Bear Put spreads, 97Bull Call Ladder strategy, 101Bull Call spreads, 92Bull Put Ladder strategy, 106Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71
Call Ratio Backspread strategy, 221Collar strategy, 243Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 49Covered Short Strangle strategy, 54Diagonal Call strategy, 66Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 289Long Call Butterfly strategy, 190Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Put Synthetic Straddlestrategy, 260Long Synthetic Future strategy, 273Modified Call Butterfly strategy, 210Modified Put Butterfly strategy, 214Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Call Synthetic strategy, 268Short Combo strategy, 284Short Guts strategy, 186Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 135Synthetic Call strategy, 248Synthetic Put strategy, 252
Index
of stockBear Call Ladder strategy, 111Bear Call spread strategy, 34Bear Put Ladder strategy, 116Bear Put spreads strategy, 96Bull Call Ladder strategy, 101Bull Call spreads, 92Bull Put Ladder strategy, 106Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71Call Ratio Backspread strategy, 221Collar strategy, 243Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 48Covered Short Strangle strategy, 54Diagonal Call strategy, 65Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 288Long Call Butterfly strategy, 190Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Put Synthetic Straddlestrategy, 260Long Synthetic Future strategy, 272Modified Call Butterfly strategy, 209Modified Put Butterfly strategy, 214Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Call Synthetic strategy, 268Short Combo strategy, 284Short Guts strategy, 186Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172
Short Put Butterfly strategy, 154Short Put Condor strategy, 163Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 134Synthetic Call strategy, 247Synthetic Put strategy, 251selling. See also mitigation of loss; tradingBull Put spreads, 32long calls, 8long puts, 16Short Call Butterfly (volatilitystrategy), 148exiting, 151trading, 148–151Short Call Condor (volatility strategy), 157exiting, 160trading, 157–161Short Call Synthetic Straddle strategy, 263exiting, 266trading, 263–266short callsbuying, 12trading, 9–10Short Combo strategy, 283exiting, 286trading, 283–286Short Guts strategy, 185exiting, 188trading, 185–188Short Iron Butterfly (volatilitystrategy), 166exiting, 169trading, 166–169Short Iron Condor (volatilitystrategy), 170exiting, 174trading, 171–174short options (taxation), 297Short Put Butterfly (volatilitystrategy), 152exiting, 156trading, 153–156
349
350
Index
Short Put Condor (volatility strategy), 161exiting, 165trading, 162–165Short Put Synthetic Straddle strategyexiting, 270trading, 267–271short putsbuying, 20trading, 16–19Short Straddle strategy, 177exiting, 180trading, 178–180Short Strangle strategy, 180exiting, 184trading, 181–184Short Synthetic Future strategy, 275exiting, 278trading, 275–278shorting stocks (taxation), 295sideways strategies, 175Long Call Butterfly, 189exiting, 192trading, 189–193Long Call Condor, 198exiting, 202trading, 198–202Long Put Butterfly, 193exiting, 197trading, 194–197Long Put Condor, 203exiting, 207trading, 203–207Modified Call Butterfly, 208exiting, 211trading, 208–212Modified Put Butterfly, 212exiting, 216trading, 213–217Short Guts, 185exiting, 188trading, 185–188Short Straddle, 177exiting, 180trading, 178–180Short Strangle, 180exiting, 184trading, 181–184
simple capital gains taxation, 294spreadsBear Call, 32exiting, 36trading, 33–36Bull Put, 28exiting, 32trading, 29–32horizontal, 69leveraged strategy, 219Call Ratio Backspread, 220–224Put Ratio Backspread, 224–229Ratio Call Spread, 229–233Ratio Put Spread, 233–238Long Iron Butterflyexiting, 40trading, 37–41Long Iron Condor, 41–45vertical, 89Bear Put, 95. See also Bear Put spreadsBull Call, 90. See also Bull Call spreadsstocksBear Call spread strategy, 34Bear Put Ladder strategy, 116Bear Put spread strategy, 96Bull Call Ladder strategy, 101Bull Call spread strategy, 92Bull Put Ladder strategy, 106Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71Call Ratio Backspread strategy, 221Collar strategy, 243Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 48Covered Short Strangle strategy, 54Diagonal Call strategy, 65Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 288Long Call Butterfly strategy, 190Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38
Index
Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Put Synthetic Straddlestrategy, 260Long Synthetic Future strategy, 272Modified Call Butterfly strategy, 209Modified Put Butterfly strategy, 214prices, 9. See also pricesPut Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Call Synthetic strategy, 268Short Combo strategy, 284Short Guts strategy, 186Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163short put strategy, 18Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276sideways strategies, 175Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 134Synthetic Call strategy, 247Synthetic Put strategy, 251taxation onshorting stocks, 295simple capital gains, 294wash sales, 295Straddle (volatility strategy), 121exiting, 126trading, 122–126Strangle (volatility strategy), 127exiting, 131trading, 128–131Strap (volatility strategy), 137–138exiting, 142trading, 138–141
strategiesanalysis of, 3basic, 1calls, 5income, 21–22Bear Call spread, 32Bull Put spread, 28Calendar Call, 57Calendar Put, 70Covered Called, 23Covered Put, 83Covered Short Straddle, 46Covered Short Strangle, 51Diagonal Call, 63Diagonal Put, 76Long Iron Butterfly, 37Long Iron Condor, 41long callsselling, 8trading, 5–8long putsselling, 16trading, 13short callsbuying, 12trading, 9–10short putsbuying, 20trading, 16–19strike priceBear Call Ladder strategy, 111Bear Call spread strategy, 34Bear Put Ladder strategy, 116Bear Put spreads, 97Bull Call Ladder strategy, 101Bull Call spreads, 92Bull Put Ladder strategy, 106Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71Call Ratio Backspread strategy, 221Collar strategy, 243Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 49Covered Short Strangle strategy, 54Diagonal Call strategy, 66
351
352
Index
strike price (Contd.)Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 289Long Call Butterfly strategy, 190Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Put Synthetic Straddlestrategy, 260Long Synthetic Future strategy, 273Modified Call Butterfly strategy, 210Modified Put Butterfly strategy, 214Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Call Synthetic strategy, 268Short Combo strategy, 284Short Guts strategy, 186Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163short put strategy, 18Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 135Synthetic Call strategy, 248Synthetic Put strategy, 252Strip (volatility strategy), 132–133exiting, 136trading, 133–136Synthetic Call strategy, 246exiting, 249trading, 246–250
synthetic calls (taxation), 299Synthetic Put strategy, 250exiting, 253trading, 251–254synthetic strategy, 239–240Collar, 240exiting, 245trading, 241–245Long Box, 287exiting, 290trading, 287–291Long Call Synthetic Straddle, 254exiting, 258trading, 255–258Long Combo, 279exiting, 282trading, 279–282Long Put Synthetic Straddle, 258exiting, 262trading, 259–263Long Synthetic Future, 271exiting, 274trading, 272–274Short Call Synthetic Straddle, 263exiting, 266trading, 263–266Short Combo, 283exiting, 286trading, 283–286Short Put Synthetic Straddleexiting, 270trading, 267–271Short Synthetic Future, 275exiting, 278trading, 275–278Synthetic Call, 246exiting, 249trading, 246–250Synthetic Put, 250exiting, 253trading, 251–254
Ttaxationon optionsCovered Calls, 299–301long options, 296–297
Index
short options, 297synthetic calls, 299on stocksshorting stocks, 295simple capital gains, 294wash sales, 295time decayBear Call spread strategy, 34Bear Put Ladder strategy, 115Bear Put spread strategy, 96Bull Call Ladder strategy, 101Bull Call spread strategy, 91Bull Put Ladder strategy, 105Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71Call Ratio Backspread strategy, 221Collar strategy, 242Covered Call strategy, 25Covered Put strategy, 85Covered Short Straddle strategy, 48Covered Short Strangle strategy, 54Diagonal Call strategy, 65Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 288Long Call Butterfly strategy, 190Long Call Condor strategy, 199Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Synthetic Future strategy, 272Modified Call Butterfly strategy, 209Modified Put Butterfly strategy, 214Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Call Synthetic strategy, 268Short Combo strategy, 284Short Guts strategy, 186
Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 134Synthetic Call strategy, 247Synthetic Put strategy, 251time period of tradeBear Call Ladder strategy, 111Bull Put Ladder strategy, 105Call Ratio Backspread strategy, 221Collar strategy, 243Long Call Butterfly strategy, 190Long Call Condor strategy, 200Long Call Synthetic Straddlestrategy, 256Long Combo strategy, 280Modified Call Butterfly strategy, 209Modified Put Butterfly strategy, 214Put Ratio Backspread strategy, 226Ratio Call Spread strategy, 230Short Call Condor strategy, 158Short Call Synthetic Straddlestrategy, 264Short Guts strategy, 186Short Iron Butterfly strategy, 167Short Iron Condor strategy, 172Short Put Butterfly strategy, 154Short Put Condor strategy, 163Short Straddle strategy, 178Short Strangle strategy, 182Short Synthetic Future strategy, 276time period to tradeBear Call spread strategy, 34Bear Put Ladder strategy, 115Bear Put spreads, 96Bull Call Ladder strategy, 101Bull Call spreads, 92Bull Put spread strategy, 30Calendar Call strategy, 59Calendar Put strategy, 71Covered Call strategy, 25
353
354
Index
time period to trade (Contd.)Covered Put strategy, 85Covered Short Straddle strategy, 48Covered Short Strangle strategy, 54Diagonal Call strategy, 65Diagonal Put strategy, 77Guts strategy, 145Long Box strategy, 288Long Iron Butterfly strategy, 38Long Iron Condor strategy, 43Long Put Butterfly strategy, 195Long Put Condor strategy, 205Long Put Synthetic Straddlestrategy, 260Long Synthetic Future strategy, 272Ratio Put Spread strategy, 235Short Call Butterfly strategy, 149Short Call Synthetic strategy, 268Short Combo strategy, 284short put strategy, 18Straddle strategy, 124Strangle strategy, 129Strap strategy, 140Strip strategy, 134Synthetic Call strategy, 247Synthetic Put strategy, 251tradingBear Call Ladder strategy, 109–113Bear Call spread strategy, 33–36Bear Put Ladder strategy, 114–118Bear Put spreads, 95–99Bull Call Ladder strategy, 100–103Bull Call spread strategy, 91–94Bull Put Ladder strategy, 104–108Bull Put spread strategy, 29–32Calendar Call strategy, 57–62Calendar Put strategy, 70–75Call Ratio Backspread strategy, 220–224Collar strategy, 241–245Covered Call strategy, 23–28Covered Put strategy, 83–84, 87Covered Short Straddle, 47–51Covered Short Strangle, 52–56Diagonal Call strategy, 64–69Diagonal Put strategy, 76–82Guts strategy, 144–147Long Box strategy, 287–291
Long Call Butterfly strategy, 189–193Long Call Condor strategy, 198–202Long Call Synthetic Straddle strategy,255–258long calls, 5–8Long Combo strategy, 279–282Long Iron Butterfly, 37–41Long Iron Condor, 42–45Long Put Butterfly strategy, 194–197Long Put Condor strategy, 203–207Long Put Synthetic Straddle strategy,259–263long puts, 13Long Synthetic Future strategy, 272–274Modified Call Butterfly strategy,208–212Modified Put Butterfly strategy,213–217Put Ratio Backspread strategy, 225–229Ratio Call Spread strategy, 229–233Ratio Put Spread strategy, 234–238risk profile charts, 1Short Call Butterfly strategy, 148–151Short Call Condor strategy, 157–161Short Call Synthetic Straddle strategy,263–266Short Call Synthetic strategy, 267–271short calls, 9–10Short Combo strategy, 283–286Short Guts strategy, 185–188Short Iron Butterfly strategy, 166–169Short Iron Condor strategy, 171–174Short Put Butterfly strategy, 153–156Short Put Condor strategy, 162–165short puts, 16–19Short Straddle strategy, 178–180Short Strangle strategy, 181–184Short Synthetic Future strategy, 275–278Straddle strategy, 122–126Str