Produktbild: Trading Options in Turbulent Markets

Trading Options in Turbulent Markets Master Uncertainty through Active Volatility Management

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Beschreibung

Produktdetails

Einband

Gebundene Ausgabe

Erscheinungsdatum

26.12.2012

Verlag

John Wiley & Sons

Seitenzahl

304

Maße (L/B/H)

23.2/16.2/3 cm

Gewicht

575 g

Auflage

2nd edition

Sprache

Englisch

ISBN

978-1-118-34354-8

Beschreibung

Produktdetails

Einband

Gebundene Ausgabe

Erscheinungsdatum

26.12.2012

Verlag

John Wiley & Sons

Seitenzahl

304

Maße (L/B/H)

23.2/16.2/3 cm

Gewicht

575 g

Auflage

2nd edition

Sprache

Englisch

ISBN

978-1-118-34354-8

Herstelleradresse

Libri GmbH
Europaallee 1
36244 Bad Hersfeld
DE

Email: gpsr@libri.de

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  • Produktbild: Trading Options in Turbulent Markets
  • Preface xiii

    Acknowledgments xv

    Introduction xvii

    Part I: Understanding the Relationship Between Market Turbulence and Option Volatility 1

    Chapter 1 Managing Risk and Uncertainty with Options 3

    What Is Risk? 4

    What Is Uncertainty? 4

    Seven Lessons Learned from Market Volatility 5

    Understanding Derivatives 7

    The Six Benefits of Options 9

    Chapter 2 Making Sense of Volatility in Options Trading 13

    Volatility as an Asset Class 14

    Analyzing Volatility with Implied Volatility 16

    What Does Implied Volatility Reveal? 16

    Making Trading Decisions Based on the Disparity between Historical and Implied Volatility 17

    Appreciating Volatility for All It Is Worth 19

    How Volatility Really Works on the Trading Floor 20

    Volatility and Uncertainty: Lessons for the Irrational Option Trader 21

    Varieties of Option Volatility Trading 23

    Chapter 3 Working with Volatility to Make Investment Decisions 25

    On Predicting the Future 25

    Starting with Historical Volatility 27

    Implied Volatility 32

    Why Do Volatilities Increase as Equities Fall? 35

    Implied versus Historical Volatility 36

    Justification for the Disparity between Historical and Implied Volatility 37

    Chapter 4 Volatility Skew: Smile or Smirk? 39

    Considering Some Examples 40

    A Primer on Random Walk and Normal Distribution 41

    Dealing with the Higher Moments of the Normal Distribution 45

    Skew Is High, Skew Is Low. So What? 47

    Does a "Flat" or "Steep" Skew Predict the Future? 48

    A Fair Warning about Thinking about Skew too Much 49

    Chapter 5 Fixated on Volatility and the VIX: What Is Volatility, Anyhow? 51

    What We (Think) We Know 52

    Definitions of VIX 54

    Grasping the VIX Index 54

    VIX-A (Very) Brief History 55

    VIX: Calculation and Interpretation with a Simple Calculator 56

    Important Insights on the VIX Index 57

    What Does the VIX Tell Us? 58

    VIX and Perhaps the Biggest Misnomer of All! 59

    Part II: Understanding Option Volatility and Its Relationship to Option Greeks, Personal Decision Making, and Odds Creation 61

    Chapter 6 Extreme Volatility and Option Delta 63

    The Misnomer of Delta and Probability of Exercise 63

    Delta Defined 65

    The Relationship Between Volatility and Delta 69

    Higher Volatility and Delta 70

    Lower Volatility and Delta 70

    Delta, Time, and Volatility 71

    Delta, Position Delta, Volatility, and the Professional Trader 72

    Chapter 7 Smoke and Mirrors: Managing Gamma through Volatile Markets 75

    Gamma and Volatility 78

    Managing Positive Gamma during a High-Volatility Environment 79

    The Bad News: There's Always More than Meets the Eye 80

    Practical Considerations for Managing Long Gamma in a High-Volatility Environment 81

    Managing Negative Gamma in a High-Volatility Environment 82

    Practical Considerations of Negative Gamma in High Volatility 84

    Gamma and Volatility with Respect to Time Structure 85

    Summary 86

    Chapter 8 Price Explosion: Volatility and Option Vega 87

    The Relationship between Implied Volatility and Vega 88

    Implied Volatility: Price Analogy 90

    Option Vega and Time 90

    Option Vega and Its Greek Cousins 91

    Option Vega Implications 91

    Don't Underestimate the Relationship between Volatility and Option Vega 91

    Volatility and Vega Insensitivity 93

    Important Concepts When Applying Option Vega in a Volatile Marketplace 94

    Summary 97

    Chapter 9 Sand in the Hourglass: Volatility and Option Theta 99

    Balancing Time Decay with Volatility: Mistakes Traders Make 101

    Volatility and Theta: What Every Investor Needs to Know 106

    Chapter 10 The Nuances of Volatility: Interpreting the mix of Academics and the Study of Volatility 109

    The Complication Surrounding Vega Risk in an Option Position 110

    Implied Volatility Skew + Term Structure = Volatility Surface 111

    Implied Volatility Term Structure 114

    Did You Know Your Volatility Has Volatility? 115

    The Normal Value of Volatility 117

    Part III: Ten Proven Strategies To Employ In Uncertain Times 119

    Chapter 11 Preparing for Trading Using Volatility Strategies 121

    The Elements of a Sound Trading Decision 122

    Developing an Approach to Options Trading 123

    The Mind of a Successful Trader 126

    Decision Making, Options versus Everything Else 128

    Chapter 12 The Buy-Write, or the Covered Call 131

    The Buy-Write (Covered Call) Defined 131

    An Example of the Covered Call Strategy 132

    The Theory and Reality of the Covered Call 133

    Covered Call Writing and Implied Volatility 137

    Implied Volatility in Practice 138

    Managing Contracts in a Time of High Volatility or a Falling Market 142

    Effective Call Writing in a Volatile Market 143

    Chapter 13 Covering the Naked Put 145

    Contemplating the Cash-Secured Put 147

    Utilizing the Cash-Secured Put in a High-Volatility Environment 149

    Cash-Secured Put and Volatility: Risks and Consequences 152

    Income Strategy: Volatility as an Asset Class and Cash-Secured Puts 154

    Position Management 155

    Chapter 14 The Married Put: Protecting Your Profit 157

    Volatility, Downside Risk, and the Case for Portfolio Insurance 157

    Why Buy High Volatility? 158

    The Married Put 159

    How and When to Use a Married Put 161

    Example of When to Use a Married Put 162

    The Married Put: Limiting Loss, Neutralizing Volatility, and Unleashing Upside Potential 165

    Married Put: A Real-Life Illustration 166

    Chapter 15 The Collar: Sleep at Night 169

    Collar Strategy 169

    Types of Collars 173

    Summary 177

    Conclusions on the Collar Strategy 181

    Chapter 16 The Straddle and Strangle: The Risks and Rewards of Volatility-Sensitive Strategies 187

    The Buying or Selling of Premium 188

    Properties of Straddles and Strangles 188

    Comparing Straddles and Strangles 189

    How to Compare Historical and Implied Volatility 192

    The Impact of Correlation and Implied Volatility Skew 193

    An Alternative to the Naked Volatility Sale via the Straddle/Strangle: The Strangle Swap 194

    Chapter 17 The Vertical Spread and Volatility 201

    Introduction to the Vertical Spread 202

    A Trader's Reasoning for Trading a Vertical Spread 203

    Designing Your Vertical Spread 205

    Vertical Spreads and Greek Exposure 208

    Vertical Spreads as a Pure Volatility Play 211

    Comparing Volatility's Effect on Vertical Spreads 212

    Summary: Comparing Vertical Spreads and Implied Volatility 213

    Chapter 18 Calendar Spreads: Trading Theta and Vega 217

    Calendar Spreading-Trading Time 218

    Risks and Rewards of the Calendar Spread 219

    A Calendar Spread with a Bullish Expectation 220

    Considerations and Observations for Calendar Spreads and Volatility 222

    Chapter 19 Ratio Spreading: Trading Objectives Tailor Made 227

    How Back Spreads and Ratio Spreads Work 227

    Back Spreads 229

    Ratio Spreads 231

    Greek Values and the Back Spread or Ratio Spread 232

    Configuring and Pricing a Back Spread or Ratio Spread 236

    Reconciling Volatility and the Back Spread or Ratio Spread 238

    Chapter 20 The Butterfly Spread 241

    Setting up a Butterfly 241

    The Butterfly Spread as a Volatility Investment 245

    Greek Values and the Butterfly 247

    Structuring and Pricing a Butterfly 250

    Trading Butterflies in a Volatile Market 250

    Chapter 21 Wingspreads 253

    Capturing Convergence and Divergence 253

    Wingspreads: Risk/Reward 254

    Wingspreads: Sensitivities 254

    Wingspreads and the Greeks 255

    Wingspreads: Various and Sundry Details 257

    The Condor Spread 258

    Conclusion 267

    About the Author 269

    Index 271