Options as a Strategic Investment

By Lawrence G. McMillan

Overview

"Options as a Strategic Investment" by Lawrence G. McMillan is widely regarded as the bible of options trading. At over 1,000 pages, it is the most comprehensive single-volume reference on options strategies available. McMillan, who is also the author of "McMillan on Options" and the founder of McMillan Analysis Corp., brings decades of practical trading experience to bear on both theoretical concepts and real-world application.

Key Themes and Arguments

Foundational Strategies

The book begins with thorough coverage of fundamental options concepts and basic strategies: buying and selling calls and puts, covered call writing, protective puts, and the mechanics of options exercise and assignment. McMillan provides detailed analysis of the risk/reward profiles for each strategy, including breakeven calculations, maximum profit/loss potential, and the impact of time decay.

Spread Strategies

Extensive coverage is provided for spread strategies of all types: vertical spreads (bull call, bear put, credit and debit varieties), horizontal (calendar) spreads, diagonal spreads, ratio spreads, backspreads, and combination strategies like straddles, strangles, and butterflies. For each strategy, McMillan details the market conditions that favor its use, the adjustments that can be made as conditions change, and the practical considerations of execution.

Volatility Trading

The book provides deep coverage of volatility as a tradeable asset, including implied versus historical volatility analysis, volatility skew and term structure, and strategies designed to profit from changes in volatility rather than directional price movement. McMillan's treatment of volatility trading is particularly valued by practitioners for its practical orientation.

Options Pricing Theory

The theoretical sections cover the Black-Scholes model, the Greeks (delta, gamma, theta, vega, rho), and their practical implications for position management. McMillan explains how to use the Greeks for portfolio-level risk management and position adjustment.

Index and Futures Options

Dedicated sections address the unique characteristics and strategies for index options and futures options, including the use of options for portfolio insurance and the mechanics of options on physically delivered versus cash-settled instruments.

Note

This PDF appears to be a scanned document with limited text extraction capability. This summary is based on the book's well-known content and structure.

Significance

Few books in finance have maintained their status as the definitive reference in their field for as long as this work. Its combination of theoretical rigor, exhaustive strategy coverage, and practical trading wisdom makes it an essential resource for any serious options trader.