There are three primary factors that affect an option's price: Implied volatility, time decay and movement in the underlying asset's price. Understanding the different roles each of these plays, and how they individually and collectively affect an option's price, leads to a better understanding of the strategies that can be used to capitalize on them. Some traders feel that movement in the stock price is most important, and as a result, they utilize strategies in which this factor plays a dominant role. On the other hand, some traders feel that implied volatility plays the dominant role, and select strategies that reflect this. However, the ideal situation would be to understand a combination of strategies that can be used to capitalize on more than one of the factors, thereby increasing the chances of success and profit.

On January 16, 2006, ChartBender hosted its 1st Options Strategy Summit in Tampa, Florida. This was a private gathering of 5 industry experts from various industry segments, who all are accomplished and experienced options traders. The purpose of this summit was threefold:

1.  Discuss the various market conditions that exist at any given time and how best to identify them;

2.  Discuss and identify the best strategies to use under any set of market conditions;

3.  Develop the framework for a reference manual designed to help the retail trader more fully understand key concepts, thereby leading to higher competency and profitability.

The summit went about accomplishing these goals by:

1.  Profiling the 5 experts on their trading methodologies, habits, perceptions and strategies;

2.  Discussing the retail traders' wants and needs and how best to serve them;

3.  Combining practical experience with identified needs.

The output from this summit is this document. It is a reference manual for the retail trader intended to help you understand and identify market conditions, and appropriate foundation strategies for those conditions, while providing some insights as to what the experts do. It is not intended to replace every option book on the shelves. Instead, the objective is to give you practical, real world insights on which you build.

The breakdown of this manual is as follows: First, a discussion of what you need to know in order to get the most out of this manual and how to use it. Second, panel members' profiles and brief biographies are provided. Third, a reference section that is a cross-matrix of strategies, market conditions and Greeks-At-Glance™ profiles. This reference section is broken down into 3 chapters: Grouping by Strategies, Strategies By Market Conditions and Strategies By Greeks-At-A-Glance Profiles.

We hope you find this manual very practical and useful. It is our intention to provide you with a fundamental framework that can be leveraged to help you convert theoretical understanding to real-life trade management and, hopefully, profits.