Customer Reviews

Protective Options Strategies: Married Puts and Collar Spreads

5 star:		(1)
4 star:		(2)
3 star:		(1)
2 star:		(1)
1 star:		(0)

 

 

This book is informative and somewhat educational, but can not be fully utilized without a suscription to PowerOptions, a service proffered by the authors. So, in that regard, the book is really just a teaser to hook you into getting an online subscription to their service at $98.00 per month. That is not a problem in itself as long as you are forewarned that the book will have very limited effectiveness for your investment pursuits without the service. I can't comment on the online service because I have not subscribed except fot the 1 month trial. I was impressed with the thoroughness of the features and the options screening, so I'm sure the service is worth a look if you are seriously into options. Just don't delude yourself into thinking that the book alone will get you very far.

This book is a good basic start for beginning option traders to learn the most simple option strategies. It explains married puts and option collar strategies and how to trade them. The reader will have a good understanding of these strategies when they finish reading this book.

One problem is that there is really very, very, few times you should ever use a married put(Insurance on a position you do not want to close due to tax implications, maybe). The reason why is that a simple long in-the-money call option gives you the same thing as a married put with very little capital. A call option gives you the upside of the underlying stock with a very limited downside (the cost of the call). Your call option will lose time value the same way that your long put would lose time value in your married put trade. Mathematically it is the same trade just much less capital.

Another thing I found disturbing was recommending the put be +9% away from your stock price. Good grief a 9% loss is ridiculous, and that is your protection? The author says it protects you from the big gap downs that your stop loss will miss due to overnight risk and the stock opening much lower. For me 9% is a huge loss. With a call option you have much less risk to your capital for this kind of strategy. The put in the married put should be much closer to benefit from the insurance (Maybe 3% out-of-the-money).

The book also explains how to trade option collars: short option- long stock-long put. The problem is option collars have high commissions to open and close so many legs and they just do not have good returns, even the best case scenarios give you small profits. Iron butterflies and Iron Condors are the most popular option trading strategies because they are the most consistently profitable with the least risk.

While this book has good basic information about the strategies presented it feels more like the authors are pushing their website than showing that these methods are valid and profitable. After reading this book I do not believe in these strategies.

This book is written much like Zerenner's weekly commentary: straightforward, succinct, sensible. The book's title is a good representation of the contents: An extended reminder to protect against downturns in individual stocks and in the market as a whole. I am among the vast majority of ordinary investors who fail to take adequate precautions, and this introduction to married puts and collar spreads was illuminating for me. The authors minimize complicated Greek calculations touted by many options books, in part because they want readers to use their web site [...] for such calculations, and in part because "These types of criteria are not important when you are screening for either of these protective strategies" (married puts and collars). Three minor criticisms: There is no discussion of covered LEAPS, which I regret; the book lacks an index; and the graphics are too small for older eyes. Nevertheless, I highly recommend Protective Options Strategies for investors who fall somewhere between beginning and advanced traders.

Ideas are solid and clearly explained. Last part of the book is geared towards his website. Sort of an advertisement. This is why 4 stars instead of 5. I would recommend the book to everyone. It explains how to protect and take income from both rising and falling stock. Instead of trying to project an outcome, you make adjustments to what the stock has already done. Hindsight is 20/20. The adjustments reduce your amount of gain when the stock goes up and reduce or eliminate losses when the stock goes down. End result is more control over your equity curve and good sleep. Example, this past week on thursday 10/29 Dow goes up 195 points. Friday Crashes 250 points. My reaction ? - Hmm, Thats interesting - Oh the grass needs cutting...

With the extreme market conditions, it is very important to protect your investments. An advantage of the collar is that the sold call helps pay for the protection. I wish I had this book before the market meltdown last Sept 2008 (the US Government should NEVER had let Lehman Brothers fail). They also have a great book on Options Sellings (Naked Puts) which helps generate income. Their www.poweropt.com service is excellent for researching, analyzing, and tracking your options trading.