How to use this book

Options give investors so much flexibility that when it came to writing a book named "The Bible of Options Strategies", I found myself cursing just how flexible they can be! Sixty strategies is a lot of ground to cover, but in reviewing them all yet again (I've done it several times already!), I was reminded of the beauty of this amazing trading instrument.

Options give us the ability to do so many things and configure our investment aims in any way we like. The benefits of options are often trotted out to new students or prospective customers as the first salvo of an up-sell campaign, but they're worth looking at again, this time, from a practical point of view.

Options enable us to:

• Control more assets for less money

  One option contract represents 100 shares of stock, and is usually a fraction of the cost of what you'd pay for the equivalent number of shares.

  For example, ABCD stock is priced at $26.20 on 2 June 2004.

  An option to buy ABCD shares (a call option) might be priced at 2.60. Because one contract represents 100 shares, we can therefore buy one ABCD call contract for $260.00 [100 * 2.60]. The alternative would be to buy 100 shares of the stock for a total sum of $2,620. So, in this example we can buy ABCD calls options for around 10% of the stock price in order to control $2,620 of ABCD stock until the appropriate expiration date of the option.

• Trade with leverage.

  Because our cost basis is so low, the position is much more sensitive to the underlying stock's price movements, and hence our percentage returns can be so much greater.

• Trade for income.

  We can design strategies specifically for the purpose of generating income on a regular basis.

• Profit from declining stocks.

  We can use puts and calls to ensure we can make money if the stock goes up, down or sideways.

• Profit from volatility or protection against various factors.

  Different options strategies protect us or enable us to benefit from factors such as time decay, volatility, lack of volatility, etc.

• Reduce or eliminate risk.

  Options allow us to substantially reduce our risk of trading, and in certain rare cases we can even eliminate risk altogether, albeit with the trade-off of very limited profit potential!

So, with all the different benefits of options, why on earth would traders not be curious to learn more about them? Well, for a start, the initial barrier to entry is quite high, in that options are reasonably complex instruments to understand for the first time. Once you're over that hurdle, however, they become more and more fascinating! The other reason is that there is such a multitude of other investment securities for people to choose from, many will pick what seems like the simplest, rather than what may fit their investment aims the best.

Given that options can be a challenge, it's my job to make life as simple as possible for you. One of the ways in which I do this is to break things down into pictures so we can see what we're doing. As soon as we can see what we're doing, life becomes much clearer when you're creating options strategies. Everything to do with OptionEasy and all my material is designed to be visual-friendly. This goes back to when I started to learn all about options and the fact that the penny only started to drop when I converted the concepts into pictures. All of a sudden, everything fitted into place, and I started to be able to extend logic faster and further than before.

This book is designed to be a reference book, one that you can pick up any time to learn about and understand a strategy. It isn't an academic workbook. It's a practical book, written for traders, designed to work interactively with your trading activities. As the title suggests, it's a book about option strategies, of which we take on 58! That's not to say you need to learn about each and every one of them, but at least you have the choice!

The Bible of Options Strategies is available at My Bookstore