THE TRADER'S GUIDE TO EQUITY SPREADS

Option spread trading is by far the most varied and versatile strategy for income generation, hedging, and speculation. To achieve longevity in the trading arena, you must understand how these spreads work and the ways to leverage them for a consistent flow of positive returns.

The Trader's Guide to Equity Spreads provides the essential info you need to set up and manage option spreads. Trading expert Randy Frederick examines each spread strategy in detail. He provides real-world examples that can be applied to all option markets--equity, futures, stock index, and interest rate--to demonstrate effective ways to control risk and increase your profits.

Frederick begins by explaining how the price of an option is calculated and how it relates to the underlying stock, exchange-traded fund, or index. He then introduces you to the spreads--from Vertical and Horizontal to Butterfly, Box, and Gut spreads--and helps you identify potential candidates for each strategy. Frederick reveals:

• Where to start if you've never traded spreads before
• The key characteristics of each spread (direction, magnitude, velocity, and volatility)
• How to find the best option spread opportunities
• The basics of spread logic, with clarification of long vs. short spreads
• Potential advantages and disadvantages of the different spread strategies

Illustrations, charts, and tables throughout help you identify the profit/loss zones for each spread strategy. In addition, explanations and calculations highlight possible outcomes at various prices both prior to and at option expiration.

Whether you're new to options or you're ready to take on more advanced spread strategies, The Trader's Guide to Equity Spreads is the only guide you need to make options a permanent, profitable part of your investment portfolio.

Randy Frederick is Director of Derivatives for Charles Schwab & Co., Inc. He is the chief architect of Schwab's option trading platforms and analytics tools. Frederick also author's monthly columns for Schwab's client newsletters, and is the host of the weekly radio show “The OPTIONal Hour” on TFNN. His articles have been published in trade magazines such as Active Trader, SFO, and Futures. A respected industry veteran, he is a frequent guest on CNBC, and his comments appear regularly in the financial news media including The Wall Street Journal, Barron's, Financial Times, Bloomberg, Dow Jones, Reuters, USA Today and TheStreet.com.

Section 1 Valuation

Section 2 Vertical Spreads

Section 3 Horizontal Spreads

Section 4 Butterfly Spreads

Section 5 Condor Spreads

Section 6 Arbitrage Spreads

Section 7 Ratio Spreads

Section 8 Advanced Spreads

Section 9 Gut Spreads

Conclusion

Glossary

Index