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You wrote, Thank you Joel Corley for such a lucid and detailed response!

You're welcome.

And, Were I to buy a beginners book on options, but a good one (classic) which ones would you suggest?
I know that pricing options is complex, but I guess I need to get more than my feet wet and simply dive in. I am not algorhythmically brilliant so something in English would be much appreciated if at all possible.

I'm sorry; but I cannot recommend a book. All I know about options has come from TMF boards and The Chicago Board of Options Exchange ( ) as well as a few other sites that contain tutorials. I've also had the luxury of discussing and analyzing various option strategies with other coworkers that are at or above my level of experience.

Also, Getting back to the "insurance" problem, thank you for assuring me that I am on the right track as far as my understanding of buying a put for a cushion against market (Nasdaq) drops. ...

Protective ATM put options are probably your best bet. However, if you're willing to take some risk, slightly out of the money puts will be cheaper and they will still provide you with protection against significant swings -- thus my comment about using near-the-money (NTM) options. Think of it like an insurance deductible. The less risk you are willing to take, the more you will have to pay for your insurance.

And, ... Still, wouldn't it be even better to buy a put and also a call option at the same strike price (at the money) so that the expected gains on QQQ would be rewarded while still protecting one were the market to suddenly tank? (Again, I am basically optimistic about the economic recovery and the upward movement of the market and only wishing to protect investments in case of a sudden exogenous event causing the market to drop.)

I know there is probably a name for this sort of option strategy but don't know what it is.

This new strategy you're suggesting is called an index straddle. It's designed to protect an investor against wild market swings. Here's a discussion about this strategy on the CBOE website:

Also, Also, does one consider which options are getting the most trading action?

I don't know the answer to this one. I don't have that much experience.

Finally, And where can I learn about "rolling over" options? Don't have a clue how this is done.

Rolling over an option contract is basically the selling of an existing contract in exchange for another contract with a more distant strike date. Rolling over option contracts is commonly done to lock in a profitable option position or to realize your insurance against a loss while simultaneously buying new coverage.

- Joel
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