Using Options in Wealth Management by Geoff Considine, Ph.D., Quantext Release Date: January 2010 Publisher: Quantext, Inc. Format: e-Book, 105 pages Table of Contents Part 1 Introduction                                                                                                                    4 The Basics                                                                                                                     6 Put-Call Parity                                                                                                               12 Options and Leverage                                                                                                     14 Going Beyond Payoff Diagrams                                                                                       15 Understanding How Options Are Valued                                                                           23 Implied Volatility                                                                                                             26 Volatility Across Asset Classes                                                                                       27 How Options Prices Inform Traditional Portfolio Management                                              30 The Volatility Smile                                                                                                         32 Diversification and Options                                                                                               35 Part 2 Options Prices and Default Risk                                                                                    39 Big Picture Concepts                                                                                                    43 Ways to Use Options: Covered Call Strategies                                                                51 Ways to Use Options: Zvi Bodie’s Concept                                                                      55 Ways to Use Options: Contrarian Strategies and Volatility                                                62 Ways to Use Options: Are You Long or Short Volatility?                                                   65 Ways to Use Options: Managing Tail Risk                                                                       69 Part 3 Ways to Use Options: Options on VIX                                                                             74 Ways to Use Options: Modified Covered Call Strategy                                                      79 Ways to Use Options: Buying Calls vs. Buying the Asset                                                 81 Ways to Use Options: Nassim Taleb and Black Swans                                                    84 Conclusions                                                                                                                  93 Appendices and Author Bio Appendix A: Risk Tolerance                                                                                          99 Appendix B: Real Options                                                                                            103 Appendix C: Monte Carlo Analysis and QPP                                                                  104 Bio of the Author                                                                                                          105   Overview While there are many good books on the theoretical aspects of derivatives, there is a need for broad strategic discussions of the use of options as part of wealth management and portfolio planning.  In this monograph, I present a coherent conceptual framework to help investors and advisors understand the ways that options can be useful in portfolio management.  I have analyzed strategies proposed by Zvi Bodie, Nassim Taleb, and Mohammed El-Erian, among others.  There is an abiding misconception that options are somehow risky and speculative.  Options can be used in this manner, but they can also be used as part of well-considered wealth management plan.  I am focused on the latter case.  We start with an overview of the basics of options, and an overview of good free tools that are available for analyzing options.  There is considerable discussion of how volatility is measured and how options prices provide estimates of future market volatility.  In a later section, I discuss a number of ‘big picture’ themes that can motivate the use of options in portfolio management.  These include consideration of the degree to which the risks associated with equities actually decline with long holding periods, starting from analysis by Zvi Bodie and moving through Nassim Taleb and, more recently, research from the University of Chicago.  Much of the text is taken up with discussion of different strategies, from simple buy-write (aka covered call strategies) to how one might build a portfolio to bet on massive and unexpected market dislocations (both good and bad ‘black swans’).  There is also discussion and analysis of strategies to exploit mis-pricing in the options markets. This e-Book can be purchased via a secure online payment for $40 USD by clicking the button below.  An electronic copy of the document will be emailed to you via email (but this is not an instantaneous transaction)

Selected articles by Geoff Considine on options Managing Downside Risk in Retirement Planning Risk Management Through Costless Collars Revisiting An Options Strategy from 2008 Profiting from Risk Aversion Additional Dimensions of Value Investing Using Default Risk to Limit Downside in Individual Stock Investing Foreign and Domestic Market Risk: Outlook from February 2007 The e-book revisits the key themes in many of these articles and looks at how the perspectives provided in them have held up.  The general level of the discussion is at or slightly above that provided in the articles.  With the book, I have the 'room' to go into further depth and to pursue various additional concepts.