Bruce C. Greig,...'s  Instablog

“Protective Options Strategies – Married Puts and Collar Spreads” (pub. Marketplace Books, 2008) by Zerenner and Chupka is a very useful, albeit brief, primer on some basic options trading strategies. The authors, exactly as the name of the book implies, favor two specific strategies: married puts (long stock, long put), and collar spreads (long stock, long put, short call). The first few chapters of the book delve into the mechanics of options for readers whom may not be familiar with the subject matter.

These initial chapters are among the most concise I have encountered when it comes to explaining options in simple language that a non-investor could understand. Countless books on options, even for the “beginner” often go into way too much detail (greeks, exotics, etc.), or present too much of the mathematics behind such concepts as the Black-Scholes pricing model.  Zerenner and Chupka, both from non-investment backgrounds, are able to relate potentially confusing concepts to the average investor in a very user-friendly way.

The authors include a chapter on fundamental stock screening approaches to choose investments for their options strategies. It must be noted that both authors are associated with a fee-based trading platform (PowerOptions) which they use to present extensive examples of trades and tables throughout the book. I did not find this to be a conflict as the software was not “pitched”, and it certainly helped to present their ideas. Plus, many investors may want such a program to assist them through the potentially imposing options markets.

After presenting the basics of married puts and collar spreads, the authors then wisely address some peripheral issues which may crop up in reader’s minds. For example, they discuss the pros and cons of “in-the-money” options vs. “at-the-money”, as it relates to their recommended strategy. Additionally, they address the benefits of using longer-term options, as opposed to those which may expire in a month or two. Later in the book, the authors briefly mention some of the more complex options strategies, such as reverse collars, margin collars and conversion spreads, but they do so in context of their original strategies. Since these are basically variations on married puts and collar spreads.

Throughout the book, the authors include short “Trading Tips” which tie the material into real-life trading situations. These sidebars are very effective in that they neatly wrap up any loose ends that the chapter may have left for the reader. Another useful aspect of the book is a very comprehensive glossary of terms used in the book, as well as concepts which would be encountered by an option trader. Overall, Zerenner and Chupka may not have broken new ground with this book, but they did succeed in taking a well-established options strategy and dissecting its components to improve the results and make it accessible for even the beginning investor.