The Index Trading Course Workbook: Step-by-Step Exercises and Tests to Help You Master The Index Trading Course (Wiley Trading)

221 Pages·2006·2.16 MB·English

by  Claire J. Creutzfeldt, George A. Fontanills, Tom Gentile

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The Index
Trading Course
Workbook
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Founded in 1807, John Wiley & Sons is the oldest independent publishing
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The Index
Trading Course
Workbook
Step-by-Step Exercises and
Tests to Help You Master
The Index Trading Course
GEORGE A. FONTANILLS
TOM GENTILE
John Wiley & Sons, Inc.
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Copyright © 2006 by George A. Fontanills, Tom Gentile, and Richard Cawood. All rights
reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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ISBN-13 978-0-471-74598-3
ISBN-10 0-471-74598-7
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
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To Ruth Cawood
who inspires us all to live up to our full potential.
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Contents
Introduction ix
CHAPTER 1 A Look Back 1
CHAPTER 2 The Index Market Today 15
CHAPTER 3 Trading the Market 27
CHAPTER 4 Understanding Options 41
CHAPTER 5 Basic Strategies Using Call Options 59
CHAPTER 6 Basic Strategies Using Put Options 73
CHAPTER 7 Complex and Advanced Strategies 85
CHAPTER 8 Catalysts 97
CHAPTER 9 System Trading 109
CHAPTER 10 Getting an Edge with Indicators 123
CHAPTER 11 Sector Trading 141
CHAPTER 12 Tracking and Trading Volatility 155
vii
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viii CONTENTS
CHAPTER 13 Making Adjustments 165
CHAPTER 14 Risk Management 177
CHAPTER 15 Important Index Facts and Strategies 185
CHAPTER 16 Getting Started 193
APPENDIX Frequently Asked Questions 203
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Introduction
The Index Trading Course Workbook is designed to supplement its com-
panion manual by offering concise summaries and practical exercises to
help put your new knowledge into action. The “Media Assignments” are
particularly useful in this regard. Be sure to run through each chapter in
this workbook as you complete The Index Trading Course in order to re-
inforce the material.
There are two major reasons why you should increase your index
knowledge. First, these market barometers are an important means for un-
derstanding big-picture trends along with more subtle market action. And
second, it’s simply about trading. Index-based products provide traders
with an opportunity to capitalize on broad market and sector moves, leav-
ing behind individual company risk. While there are no guarantees that a
whole group of related companies won’t be investigated by the SEC for
bad accounting practices, we feel the chance of that is substantially lower
than for a single company. Sector investing is where fundamental, techni-
cal, and sentiment analysis can really excel.
The Index Trading Course begins with a little index history à la
Charles Dow, and then transitions to widely followed indexes in today’s
markets. Along the way, we investigate index construction, market trends,
and general industry group coverage. The workbook reinforces your
knowledge of core stock market indexes along with the sector offerings
from a variety of financial entities. You also have the opportunity to incor-
porate foundational technical techniques into your analysis. Regardless of
the complexity of indicators you use down the road, you can never move
too far away from the basics.
The Index Trading Course quickly moves toward trading applications
with coverage of index-based products, including exchange-traded funds
(ETFs), index options, and ETF options. These different securities are
used throughout the remainder of the text with appropriate trading strate-
gies. Optionetics’ low-risk, high-reward philosophy permeates the strategy
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