Options for the Beginner and Beyond: Unlock the Opportunities and Minimize the Risks

by W. Edward Olmstead

Overview

Published in 2006 by Financial Times Prentice Hall, this book by W. Edward Olmstead -- Professor of Applied Mathematics at Northwestern University's McCormick School of Engineering and editor for The Options Professor newsletter -- provides a structured progression from options fundamentals to advanced strategies. The book bridges the gap between academic options theory and practical trading application.

Structure and Content

The book is organized into two main sections. Section I: Basic Concepts covers the option contract, calls and puts, option selection, entering and exiting trades, and the Greeks (delta, gamma, theta, vega). Olmstead uses his mathematical background to explain intrinsic value, time value, and the factors affecting option prices with clarity. Section II: Beyond the Basics explores covered calls, married puts, vertical spreads (bull call, bear put), straddles, strangles, calendar spreads, LEAPS, and collar strategies.

Key Topics

• Option Selection: How to evaluate whether an option is "cheap" or "expensive" relative to implied volatility and historical norms.
• The Greeks: Practical applications of delta for position sizing, gamma for risk assessment, theta for time decay management, and vega for volatility exposure.
• Strategy Construction: Each strategy is presented with clear entry criteria, risk/reward profiles, adjustment techniques, and exit rules.
• LEAPS: Extended discussion of long-term options as stock substitutes and income-generation tools.
• Portfolio Protection: Using puts and collars to protect existing stock positions against downside risk while maintaining upside participation.

Audience

Designed for investors with basic stock market knowledge who want to add options to their toolkit, the book avoids unnecessary jargon while maintaining mathematical rigor. Olmstead's academic background ensures precise definitions and logical progression.