"The Secret Weapons of Option Traders - 2nd Edition"
by Vladimir Furman

Download These Powerful Secrets NOW for only $29.99

 

"This work by Vlad Furman is an excellent introduction to options. All of the terms and conditions necessary to gain an understanding of the subject are included.

The section on strategy is excellent, because it concentrates on scenarios that a public customer can use to make money with options.

I especially like the concepts for straddle buying, because they lay out in detail the requirement necessary for selecting a winning position."

Larry McMillan -- World Famous Trader and Author of "McMillan on Options" and "Options as a Strategic Investment".

The Power Analyzer By: Vladimir Furman

 

  You have probably heard that trading Options is a "very risky" business, and you may even know people who have lost money by trading Options. It's also possible that you know people who regularly make money by trading Options, and you may think it's "Lady Luck" more than anything else that makes them winners in this seemingly hazardous occupation.

  So what is it that makes some Options traders "Lucky"? What do these traders have that others don't? The answer in fact, is really very simple. As a group, successful traders have two things in common:

  • First, they have adopted sound and sensible methods for analyzing Options.
  • Second, they have acquired the proper tools for undertaking accurate analysis in support of their strategies. If that's called Luck, so be it! In this book I want to show you my own fast and easy route to this elite group of “Lucky” traders.

  This book will show you step by step how to build profitable trades. I will not use any complicated formulas to define any subjects. I will try to explain in plain English all correlations between different parameters.
  I spoke to a lot of traders who wanted to be options traders, but was scared to death after reading some options book with complicated mathematical stuff in it. They are thinking that all these "options stuff" is above their heads and too risky to be involved with. And it is hard to blame them for this, because people usually afraid doing something that they could not comprehend the basics of. In reality options trading is far from rocket science. It is pretty simple after you learn the basics and understand relationship between the main components.

  I am strongly believe that option trading does not required knowledge of standard deviation or normal distribution and especially how to calculate some of them. Now days with the Internet and PC at your disposal you do not have to have scientific calculator and equations to perform calculations. You can easily find all these on the Internet. What I think each option trader must know is how to build and analyze trades. What market conditions to look for and how to take advantage of them by using appropriate option strategy.

  I am a mathematician and I enjoy all maths behind option trading. I think option trading is more structured and more science than stock trading that I consider more Art than Science.

  Look at the market "gurus" that you can sea on TV or read in the newspapers. How many times you witness the situation where their analysis and predictions for the same company were going into two different directions. I do not want to criticize them for this. I just want to emphasize that their fundamental and technical analysis is more Art than Science. It based on their subjective interpretation of the facts and not supported by real scientific analysis.

  There is a big difference in the way you trade underlying stocks and commodities than Options. When you trade the underlying you are trying to predict the direction in which the underlying will go. Many novice Option traders use the same attitudes in Option trading, trying to Buy Calls or Puts based on their assumption of market direction. This is the main reason most people lose money by trading Options.

  Let me explain why they are loosing money. From mathematical (scientific) stand point there is a 50% probability that underlying price will go up or down, unless you have some "inside information" on it.

  Any option has so called "time value". For right now let me define it as a price that option buyer agrees to pay for this option above its real (intrinsic) value. Now lets analyze your probability of success in "option trade", where you are trying to buy Call option on a stock that you think will go up. Your profit zone will start at least at current Stock price plus "Time value" you paid for this option (in many cases it will be even further from the stock price, if you bought out-of-the-money option) What it means from the probability stand point? It is 50% chance that stock will move up and, let say, it is 10% probability that stock will move from its current price into your profit zone. The simple calculation is showing that you have only 40% to be profitable. When you are trying to buy Call (Put) you have to predict not only the direction of the move, but also its magnitude.

  Option trading is a completely different "ball game". In many cases you do not care which direction the underlying will go. You are only looking for a big move in the underlying price. In Option trading there is also a way to build Option strategies with 80% or more probability of success and positive expected profit/loss.

  If you are in a market for just a couple trades and want to employ "Hit and Run" tactic this book is not for you, because I do not know scientific way to succeed in this type of trading. For me it is combination of Art and truly luck. But if you want to be in the market for a long time and be profitable that is something I can teach you how to do. I do not promises you will always win, but I can guarantee if you follow my steps, you will be overall profitable. Las Vegas is a living and prospering example, which makes me so confident in this basic idea. Casinos are using the same mathematical theory of playing odds and expected profit/loss to pull money from their guests, as I will teach you. You probably know the only way to make money in casino is to own the casino. I will show you how to "build" your own casino, where You are setting the odds in your favor and than playing against the other traders (your casino guests).

"The Secret Weapons of Options Traders" is available for just $29.99.

 

Trading results from examples used in

"Secret Weapons" ~ a message from the author.

The Secret Weapons of Option Trading was written in July, 1999. I would like to provide you with a sample of the trading results from the book. When I created these examples, I did not know what would happen. I took a risk and put my reputation on the line. It was not gambling but rather the very same calculated risk that the PowerAnalyzer provides you with every market day.

Please review the results of these examples and join the league of the so-called "Lucky" traders like so many successful subscribers to PowerAnalyzer!

Example #1 - Straddle from Option Secret #1

This sample trade was created on July 7, 1999 and came from our Low Implied Volatility list. We selected SKYT - SKYTEL COMMUNICATIONS, Inc. Implied volatility was low, which means we bought options relatively cheap. Statistical Volatility was low, which gives us a high probability that the underlying price of the stock will start to move. We bought a Straddle with an expiration months 5 month in advance.

Our Expected Profit/Loss was positive and the Probability of Profit was good. We followed all our Rules in this example except one... Rule #4 - Always check company news before buying straddle and avoid stocks, which are in merger talks.

We intentionally did this to show you the importance of each of these rules. SkyTel announced a merger with MCI WorldCom (Nasdaq:WCOM). The merger was set to complete on September 22, 1999. With mergers, you will normally see an immediate price adjustment to reflect the purchase price. Once the price has been set, the underlying stock price will rarely fluctuate. Unless you want to bet on the deal failing, buying this Straddle is a big mistake, which you can easily avoid by checking company news. You can find this information on a number of financial websites.

Example #2 - High Probability Put Credit Spread from Option Secret #3

This trade was created on Monday, July 12, 1999. TQNT - Triquint Semiconductor, Inc. was selected from our stocks with High Implied Volatility list. On July 12, 1999 the stock price was $45 1/4 and by selling the August $40 Put and buying the August $36.625 Put we collected a credit of $1.

Our Margin on this trade was $2.375. On August 20, 1999 (the date of Options expiration) the price of the stock was $50 3/4. Both of options expired worthless and we kept the credit. Our Return on Investment in just one month is over 40%! Not bad considered the general market dropped 10% during this period!

Example #3 - Covered Call from Option Secret #4

For this trade we selected EBAY. EBAY appeared in our list of the Best Covered Calls Short Term. On July 15, 1999 EBAY was trading at $12. We bought 100 shares of the underlying and sold an August $130 Call for $13.

On August 21st, 1999 the Options expired and EBAY closed at $123. Had we purchased only the underlying we would have lost $4 per share. However, in this case we implemented Covered Call strategy and on August 20, 1999, the $130 Call expired worthless we were able to keep our Credit and recover this trade from $4 Losses to $9 Profit!

Example #4 - Covered Straddle from Option Secret #4

In this example we showed you how you can increase your profit zone by selling a Covered Straddle. In this trade we bought EBAY stock at $127 and sold not only the August $130 Call, but also August $130 Put. Our total credit was $28.25.

As mentioned above, EBAY closed at $123 on August 20. Our 130 Call Option expired worthless, but our 130 Put Option was in the money so in order not to get assigned the stock we decided to sell this option before closing for $8.25 ($7 - intrinsic value and $1.25 - time value.) Our credit was reduced to $20. This made our overall Profit equal $16. Again instead of losing $4 per share by purchasing only the underlying, we got Profit of $16!

If you'd like to learn more about how to use the PowerAnalyzer to yield these kinds of results, please order my book. I'm certain you'll enjoy it. In fact, one recent customer said...

"I'm enjoying your new Secret Weapons book. I have read just about every book on options out there. Most of these treat volatility in an academic way. I appreciate your approach...explaining exactly how to use both implied and statistical volatility."

- Gary Klapow

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