Practical option strategies for the new post-crisis financial market Traditional buy-and-hold investing has been seriously challenged in the wake of the recent financial crisis. With economic and market uncertainty at a very high level, options are still the most effective tool available for managing volatility and downside risk, yet they remain widely underutilized by individuals and investment managers. In Options for Volatile Markets, Richard Lehman and Lawrence McMillan provide you with specific strategies to lower portfolio volatility, bulletproof your portfolio against any catastrophe, and tailor your investments to the precise level of risk you are comfortable with. While the core strategy of this new edition remains covered call writing, the authors expand into more comprehensive option strategies that offer deeper downside protection or even allow investors to capitalize on market or individual stock volatility. In addition, they discuss new offerings like weekly expirations and options on ETFs. For investors who are looking to capitalize on global investment opportunities but are fearful of lurking "e;black swans"e;, this book shows how ETFs and options can be utilized to construct portfolios that are continuously protected against unforeseen calamities. A complete guide to the increased control and lowered risk covered call writing offers active investors and traders Addresses the changing investment environment and how to use options to succeed within it Explains how to use options with exchange-traded funds Understanding options is now more important than ever, and with Options for Volatile Markets as your guide, you'll quickly learn how to use them to protect your portfolio as well as improve its overall performance.

Practical option strategies for the new post-crisis financialmarketTraditional buy-and-hold investing has been seriously challengedin the wake of the recent financial crisis. With economic andmarket uncertainty at a very high level, options are still the mosteffective tool available for managing volatility and downside riskyet they remain widely underutilized by individuals and investmentmanagers. In Options for Volatile Markets, Richard Lehmanand Lawrence McMillan provide you with specific strategies to lowerportfolio volatility, bulletproof your portfolio against anycatastrophe, and tailor your investments to the precise level ofrisk you are comfortable with.While the core strategy of this new edition remains covered callwriting, the authors expand into more comprehensive optionstrategies that offer deeper downside protection or even allowinvestors to capitalize on market or individual stock volatility.In addition, they discuss new offerings like weekly expirations andoptions on ETFs. For investors who are looking to capitalize onglobal investment opportunities but are fearful of lurking "blackswans", this book shows how ETFs and options can be utilized toconstruct portfolios that are continuously protected againstunforeseen calamities.* A complete guide to the increased control and lowered riskcovered call writing offers active investors and traders* Addresses the changing investment environment and how to useoptions to succeed within it* Explains how to use options with exchange-traded fundsUnderstanding options is now more important than ever, and withOptions for Volatile Markets as your guide, you'll quicklylearn how to use them to protect your portfolio as well as improveits overall performance.

Preface xiIntroduction The "New Normal" in Equity Investing 1Chapter 1 Option Basics 7What Are Options? 7Exercise and Assignment 14Positions 17How Options Are Traded 19Options in Your Account 22Chapter 2 Option Pricing and Valuation 25Option Premium 25Theoretical Value 27Time Value 28Volatility 31Interest Rates 32Dividends 32Calls versus Puts 33Option Skews and Anomalies 34Chapter 3 The Basics of Covered Call Writing 37Requirements for "Valid" Covered Writes 38Risk/Reward of a Covered Write 39Calculating Potential Returns 46Major Factors Affecting Call-Writing Returns 48Covered Writing as an Ongoing Strategy 54Summing Up Covered Writing 57Chapter 4 Implementing Covered Call Writing 59Follow-Up Actions 59Behavioral Issues 69Differing Approaches 70Selecting Calls to Write 77Risks 80Basic Tax Rules for Options 81Summing Up Implementation 84Chapter 5 Advanced Call-Writing Techniques 87Writing Calls on "Hot" Stocks 88Tax Deferral Strategies 89Covered Writing on Margin 90Covered Writing against Securities Other Than Stock 93Partial Writing, Mixed Writing, and Ratio Writing 98Put Writing 103Expiration Games 106Option-Stock Arbitrage 108Chapter 6 Basic Put Hedging 111Put Hedge Basics 111Advantages 115Disadvantages 116Behavioral Implications 123Put Hedge versus Covered Call 127Hedging against Catastrophic Risk 129Chapter 7 Advanced Hedging Strategies 131Put Hedge Follow-Ups 131Using Put Spreads to Hedge 137Collars 145Conclusions on Protective Option Strategies 151Chapter 8 Options on ETFs 153ETFs in a Nutshell 154ETF Options 158Covered Call Writing on ETFs 159Our Put Hedge and Collar Study on SPY 162Appendix: Partial List of ETFs with Listed Options 165Chapter 9 Volatility and Volatility Derivatives 171What Is Volatility? 171Using VIX as a Market Indicator 173Volatility Futures 179Variance Futures 181The Behavior of VIX Futures 183VIX Options 191VIX Option Strategies 199The Future 204Acknowledgments 205About the Authors 206Index 207