Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term by Pestrichelli Jay & Ferbert Wayne

Author:Pestrichelli, Jay & Ferbert, Wayne [Pestrichelli, Jay]
Language: eng
Format: mobi
Publisher: Pearson Education (US)
Published: 2011-09-28T16:00:00+00:00

• OTM calls have a strike price above the market, and OTM puts have a strike price below the market.

18. Understanding and Using Options

“I guess that was your accomplice in the wood chipper.”

—Marge Gunderson (played by Frances McDormand) in Fargo (1996)

Just a gentle reminder that there are two sides to every option trade. The value that options command isn’t as unpredictable as a staged kidnapping like Fargo, but nonetheless, there are winners and losers in every trade. Being aware of how options are valued is important to know before using them as a hedging vehicle and keeping you out of the wood chipper.

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