Back to Library

The Option Trader Handbook: Strategies and Trade Adjustments

by George M. Jabbour and Philip H. Budwick (2004)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

The Option Trader Handbook: Strategies and Trade Adjustments

Executive Summary

George M. Jabbour and Philip H. Budwick present a practical handbook focused on what most options books neglect: managing and adjusting trades after they are placed. The book introduces the SCORE formula for trading success and systematically covers adjustment strategies for every common options position, from simple long stock with protective puts to complex multi-leg spreads, addressing the critical question of what to do when a trade moves against you.

Core Thesis

Trade management is as important as trade selection, yet most options education focuses exclusively on initial position construction. The book argues that having a pre-planned adjustment strategy for every scenario transforms options trading from reactive guessing into a systematic business process where risk is managed proactively.

Chapter-by-Chapter Summary

  • Chapter 1: Trade and risk management philosophy, the SCORE formula (Select, Choose, Open, Remember, Exit)
  • Chapter 2: Tools of the trader including option pricing, Greeks, synthetic positions, and basic strategies
  • Chapters 3-6: Detailed adjustment strategies for long stock, short stock, long calls/puts, and short calls/puts
  • Subsequent chapters: Advanced spread adjustments including butterflies, condors, ratio spreads, and calendar spreads

Key Concepts

  • SCORE Formula: A five-step process for systematic trade execution
  • Trade Adjustments: Pre-planned responses to adverse market moves
  • Rolling Strategies: Techniques for rolling positions to different strikes or expirations
  • Synthetic Equivalences: Understanding how synthetic positions enable flexible adjustments
  • Collar Strategies: Using collars and variable collars for risk management

Practical Applications

  • Pre-planned adjustment protocols for every options position
  • Decision trees for when to adjust, roll, or close positions
  • Techniques for converting losing positions into manageable risks
  • Portfolio-level risk management through diversification and flexibility

Critical Assessment

The book fills a genuine gap in options literature by focusing on trade management rather than just trade entry. The systematic coverage of adjustments for each strategy is thorough and practical. The writing can be somewhat dry and formulaic, but this reflects the systematic nature of the subject matter.

Conclusion

The Option Trader Handbook is an essential reference for options traders who understand that entering a trade is only the beginning of the process.