Managing Volatility and Protecting against Catastrophic Risk

Authors: Richard Lehman & Lawrence G. McMillan

Today’s financial markets harbor risk and uncertainties far beyond historically accepted norms—especially when it comes to the “new normal” of equity investing, which presents new challenges in managing these risks. Nobody understands this better than authors Richard Lehman and Lawrence McMillan, and now, with the Second Edition of Options in Volatile Markets, they share their extensive experience in this evolving field with you.

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 the Second Edition of Options in Volatile Markets, you’ll discover specific strategies to lower portfolio volatility, protect your portfolio against any catastrophe, and tailor your investments to the precise level of risk you are comfortable with.

Engaging and informative, this new edition remains true to the core strategy of covered call writing, but also expands into more comprehensive option strategies that offer deeper downside protection or even allow you to capitalize on market or individual stock volatility. It opens with a quick refresher on options, from how they’re traded to the factors that affect their price, then moves on to reveal the most effective covered call writing techniques currently available. While basic covered call writing is thoroughly explained, you’ll also gain valuable insights into more sophisticated implementations of call writing, including the use of margin, employing underlying securities other than stocks, and partial or ratio writing.

Lehman and McMillan also examine other important, but often underutilized option strategies—such as put hedging and spreading—discuss follow-up actions that stem from basic put hedging, and explore using combined put-call strategies as a continuous portfolio management approach for dealing with volatility and reducing downside risk. Along the way, you’ll even become familiar with the rapidly growing practice of using options with exchange-traded funds (ETFs); learn how to actually trade volatility by itself through recently introduced vehicles like VIX and VXX; or employ volatility strategies to hedge an equity portfolio.

Understanding options is now more important than ever. With the Second Edition of Options in Volatile Markets as your guide, you’ll quickly learn how to use them to protect your portfolio as well as improve its overall performance.

Each copy purchased from Optionstrategist.com will be autographed by Lawrence G. McMillan.

Table of Contents

• Chapter 1 - Option Basics
• Chapter 2 - Option Pricing and Valuation
• Chapter 3 - The Basics of Covered Call Writing
• Chapter 4 - Implementing Covered Call Writing
• Chapter 5 - Advanced Call-Writing Techniques
• Chapter 6 - Basic Put Hedging
• Chapter 7 - Advanced Hedging Strategies
• Chapter 8 - Options on ETFs
• Chapter 9 - Volatility and Volatility Derivatives

Reviews

"Once again, McMillan and Lehman have created new and insightful updates into the world of derivatives trading. Every time you think you've mastered the game, these two industry titans prove you wrong. It's uncanny. In fact, let me put it this way: If you think you know options markets, think again."

—Richard Bensignor, President and Chief Strategist at Bensignor Strategies, Inc.; Editor of New Thinking in Technical Analysis

"Highly recommended for serious investors aiming to protect their portfolios from the next 'black swan' event. It's not a question of 'if' but 'when.' Be prepared with the tactics in this book."

—Donato A. Montanaro, Jr., Chairman and CEO, TradeKing

"Options for Volatile Markets provides the reader with time-tested option strategies for capital appreciation, income generation, and limiting losses. As discovered during the financial hurricane of 2008, asset diversification is not enough. Properly implemented, option strategies can be the difference between financial success and failure during volatile times."

—Kenneth G. Winans, CMT, MBA, President and Founder, Winans International; award-winning author and Forbes.com columnist

"The 'new normal' post-2008 world involves more than just lower returns, it comes with an overhang of serious risk to boot. This book provides clear strategies to both boost returns and protect against 'fat-tail' risks that can destroy capital."

—Stephen Savage, Managing Partner, Litman/Gregory Asset Management

"Successful investment management over time is not driven by how much one makes, but rather by how much one consistently does not lose. The best investors and traders of which I know focus first on risk management and secondly on profit maximization. After witnessing the financial market volatility of the last decade, absolute returns and consistency of those returns should be a key objective of institutional as well as retail investors going forward. Lehman and McMillan provide a roadmap of creative, intelligent, and purposeful options strategies for achieving exactly this."

—Brian Pretti, CFA, CFP, Chief Investment Officer, Mechanics Bank

Product Details

Hardcover: 224 pages
Publisher: Bloomberg Press; 2 edition (August 9, 2011)
Language: English
ISBN-10: 1118022262
ISBN-13: 978-1118022269
Product Dimensions: 9.1 x 6 x 0.9 inches