Option Trader's Workbook, The: A Problem Solving Approach

Product Author Bios

Jeff Augen, currently a private investor and writer, has spent more than a decade building a unique intellectual property portfolio of databases, algorithms, and associated software for technical analysis of derivatives prices. His work, which includes more than a million lines of computer code, is particularly focused on the identification of subtle anomalies and price distortions.

As a cofounding executive of IBM’s Life Sciences Computing business, he defined a growth strategy that resulted in $1.2 billion of new revenue and managed a large portfolio of venture capital investments. From 2002-2005, he was President/CEO of TurboWorx, a software company founded by the chairman of the Department of Computer Science at Yale University. He is the author of two previous books: The Volatility Edge in Options Trading (FT Press 2008) and Bioinformatics in the Post-Genomic Era (Addison-Wesley 2005).

“Unlike most books that oversimplify trading situations, Augen’s approach forces you to learn by solving real-world problems where stock prices spike up and down and volatility changes constantly. Learning by doing is a distinct advantage for both novice and expert.”

--Sean Sztern, Alternative Strategies Group, Desjardins Securities

“This workbook represents a unique and effective learning tool. It will broaden your understanding of options and raise your trading skills to a higher level.”

--Dr. W. Edward Olmstead, Northwestern University, author of Options for the Beginner and Beyond

“Serious options trading requires skills that can only be learned through practice. Augen’s progressively more challenging problems definitely provide that real-world practice. There are lessons here for everyone, from beginner to sophisticated professional.”

--James Marcus, Partner, CMG Holdings, LLC

Most options books offer theory and strategies but don’t give you what you really need: hands-on practice that prepares you for real-world trading, where subtle decisions make the difference between winning and losing. Now, there’s a solution: The Option Trader’s Workbook.

Using a question and answer format, this innovative workbook covers key scenarios you’ll encounter as an option trader. Expert trader Jeff Augen explains the challenges they present, reveals the potential pitfalls, and walks you through each example to help you understand how to maximize your success. You’ll master trades designed to profit from rising or falling stock prices, rising or falling volatility, time decay, rapid price spikes, and many other market dynamics. Each section helps you build your skills one trade at a time---whether you’re new to options or you’ve been trading for years.

• Learn by doing--not by reading or memorizing
  Practice real decision-making in real trading situations
• Gain a detailed, intuitive understanding of pricing
  Understand exactly what must happen for your trade to be profitable
• Learn to identify efficient trade structures
  Avoid errors that cause losses even when you’ve correctly predicted a stock’s direction
• Learn how to manage risk effectively
  Optimize profits by choosing the right option strategy for a particular situation
• Use complex trading strategies with confidence
  Master highly profitable techniques used by professionals

Table of Contents

Preface     ix

Notes     1

Chapter 1 Pricing Basics     3

Chapter 2 Purchasing Puts and Calls     43

Chapter 3 Covered Puts and Calls     91

Chapter 4 Complex Trades--Part 1     125

Chapter 5 Complex Trades--Part 2     173

Glossary      215

Index     221