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This document describes how to use Options Laboratory Strategist™. It assumes you have a basic understanding of financial options, and focuses on operating the software.
Option investments have intrinsic risks of substantial loss, and option trading is not a suitable activity for all investors. This software uses mathematical models to help you assess the risks and potential rewards of option investments. Because option models are statistical in nature, the actual outcome of any specific trades you make will inevitably vary somewhat from the program's mathematical projections. Only you and your investment advisors can determine whether any particular trade or strategy is appropriate for you.
Options are unique financial instruments: there are widely accepted mathematical formulas and methods that give good estimates of the future value of an option. Despite the fact that it's usually hard to know what a stock is really worth, we can mathematically estimate the value of an option on that stock, today or in the future. This remarkable achievement, the Black-Scholes option model, deservedly earned a Nobel prize.
But the performance of any option strategy depends on interactions and relationships among many factors. Even the simplest strategies are difficult to evaluate correctly and consistently without good mathematical modeling tools. Far too many people trade options without really understanding what they're doing. They lose a little money on most trades, or occasionally they lose a bundle. They fail for lack of clear understanding.
Options Laboratory shows you mathematical forecasts of your real-world option positions in an easy-to-understand graphical format. It turns obscure formulas and parameters into meaningful dollar measures of risk and reward that you can understand as an investor.
With Options Laboratory you can:
To these powerful basics, Options Laboratory Strategist adds the ability to automatically generate, select and score option combination strategies. You can
Strategy rules specify relationships that must hold between the elements of any generated combination. For example, a strategy might require that the strike price of an option you sell must be less that the stock price, while the strike of a second option you will buy is greater; and that the one you buy should be priced below its fair value, while one you sell is priced above; and that you want to buy 2 calls while you sell 3 others.
With these tools, a few mouse clicks will immediately reveal the most promising combination trades on any stock, according to your own personal criteria.
Options Laboratory is fast, powerful and easy to use. It requires the Microsoft Windows® XP operating system, and an Internet connection. It will usually also work on Windows 2000 systems, if the web browser is up-to-date.