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Trading Options Greeks
How Time, Volatility, and Other Pricing Factors Drive Profits
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633 g
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236x156x38 mm
Beschreibung:
DAN PASSARELLI is the founder and CEO of Market Taker Mentoring, a leading options education firm that provides personalized, one-on-one mentoring for option traders and online classes. He began his trading career on the floor of the Chicago Board Options Exchange (CBOE) as an equity options market maker and also traded agricultural options and futures on the floor of the Chicago Board of Trade (now part of the CME Group). In 2005, Passarelli joined CBOE's Options Institute and began teaching both basic and advanced trading concepts to retail traders, brokers, institutional traders, financial planners and advisors, money managers, and market makers. He has appeared on FOX Business News and other business television programs and contributes to financial publications such as TheStreet.com, SFO.com, and the CBOE's blog. Passarelli is the author of the first edition of Trading Option Greeks and The Market Taker's Edge.
Foreword xiii
Preface xv
Acknowledgments xix
PART I: THE BASICS OF OPTION GREEKS
CHAPTER 1 The Basics 3
Contractual Rights and Obligations 3
ETFs, Indexes, and HOLDRs 9
Strategies and At-Expiration Diagrams 10
CHAPTER 2 Greek Philosophy 23
Price vs. Value: How Traders Use Option-Pricing Models 24
Delta 25
Gamma 32
Theta 38
Vega 42
Rho 46
Where to Find Option Greeks 51
Caveats with Regard to Online Greeks 52
Thinking Greek 53
Notes 53
CHAPTER 3 Understanding Volatility 55
Historical Volatility 55
Implied Volatility 58
Expected Volatility 61
Implied Volatility and Direction 67
Calculating Volatility Data 68
Volatility Skew 69
Note 72
CHAPTER 4 Option-Specific Risk and Opportunity 73
Long ATM Call 73
Long OTM Call 79
Long ITM Call 83
Long ATM Put 84
Finding the Right Risk 89
It's All About Volatility 89
Options and the Fair Game 93
Note 94
CHAPTER 5 An Introduction to Volatility-Selling Strategies 95
Profit Potential 95
CHAPTER 6 Put-Call Parity and Synthetics 113
Put-Call Parity Essentials 113
American-Exercise Options 119
Synthetic Stock 120
Synthetic Stock Strategies 124
Theoretical Value and the Interest Rate 132
A Call Is a Put 133
Note 133
CHAPTER 7 Rho 135
Rho and Interest Rates 135
Rho and Time 137
Considering Rho When Planning Trades 138
Trading Rho 142
Notes 143
CHAPTER 8 Dividends and Option Pricing 145
Dividend Basics 145
Dividends and Option Pricing 147
Dividends and Early Exercise 148
Inputting Dividend Data into the Pricing Model 152
PART II: SPREADS
CHAPTER 9 Vertical Spreads 163
Vertical Spreads 164
Verticals and Volatility 178
The Interrelations of Credit Spreads and Debit Spreads 180
Building a Box 181
Verticals and Beyond 183
Note 183
CHAPTER 10 Wing Spreads 185
Condors and Butterflies 185
Taking Flight 185
Keys to Success 194
Greeks and Wing Spreads 195
Directional Butterflies 195
Constructing Trades to Maximize Profit 198
The Retail Trader versus the Pro 205
Notes 207
CHAPTER 11 Calendar and Diagonal Spreads 209
Calendar Spreads 209
Trading Volatility Term Structure 218
Diagonals 228
The Strength of the Calendar 233
Note 233
PART III: VOLATILITY
CHAPTER 12 Delta-Neutral Trading: Trading Implied Volatility 237
Direction Neutral versus Direction Indifferent 237
Delta Neutral 238
Trading Implied Volatility 241
Conclusions 247
CHAPTER 13 Delta-Neutral Trading: Trading Realized Volatility 253
Gamma Scalping 254
Art and Science 258
Gamma, Theta, and Volatility 259
Gamma Hedging 259
Smileys and Frowns 265
CHAPTER 14 Studying Volatility Charts 269
Nine Volatility Chart Patterns 269
Note 282
PART IV: ADVANCED OPTION TRADING
CHAPTER 15 Straddles and Strangles 285
Long Straddle 285
Short Straddle 293
Synthetic Straddles 298
Long Strangle 299
Preface xv
Acknowledgments xix
PART I: THE BASICS OF OPTION GREEKS
CHAPTER 1 The Basics 3
Contractual Rights and Obligations 3
ETFs, Indexes, and HOLDRs 9
Strategies and At-Expiration Diagrams 10
CHAPTER 2 Greek Philosophy 23
Price vs. Value: How Traders Use Option-Pricing Models 24
Delta 25
Gamma 32
Theta 38
Vega 42
Rho 46
Where to Find Option Greeks 51
Caveats with Regard to Online Greeks 52
Thinking Greek 53
Notes 53
CHAPTER 3 Understanding Volatility 55
Historical Volatility 55
Implied Volatility 58
Expected Volatility 61
Implied Volatility and Direction 67
Calculating Volatility Data 68
Volatility Skew 69
Note 72
CHAPTER 4 Option-Specific Risk and Opportunity 73
Long ATM Call 73
Long OTM Call 79
Long ITM Call 83
Long ATM Put 84
Finding the Right Risk 89
It's All About Volatility 89
Options and the Fair Game 93
Note 94
CHAPTER 5 An Introduction to Volatility-Selling Strategies 95
Profit Potential 95
CHAPTER 6 Put-Call Parity and Synthetics 113
Put-Call Parity Essentials 113
American-Exercise Options 119
Synthetic Stock 120
Synthetic Stock Strategies 124
Theoretical Value and the Interest Rate 132
A Call Is a Put 133
Note 133
CHAPTER 7 Rho 135
Rho and Interest Rates 135
Rho and Time 137
Considering Rho When Planning Trades 138
Trading Rho 142
Notes 143
CHAPTER 8 Dividends and Option Pricing 145
Dividend Basics 145
Dividends and Option Pricing 147
Dividends and Early Exercise 148
Inputting Dividend Data into the Pricing Model 152
PART II: SPREADS
CHAPTER 9 Vertical Spreads 163
Vertical Spreads 164
Verticals and Volatility 178
The Interrelations of Credit Spreads and Debit Spreads 180
Building a Box 181
Verticals and Beyond 183
Note 183
CHAPTER 10 Wing Spreads 185
Condors and Butterflies 185
Taking Flight 185
Keys to Success 194
Greeks and Wing Spreads 195
Directional Butterflies 195
Constructing Trades to Maximize Profit 198
The Retail Trader versus the Pro 205
Notes 207
CHAPTER 11 Calendar and Diagonal Spreads 209
Calendar Spreads 209
Trading Volatility Term Structure 218
Diagonals 228
The Strength of the Calendar 233
Note 233
PART III: VOLATILITY
CHAPTER 12 Delta-Neutral Trading: Trading Implied Volatility 237
Direction Neutral versus Direction Indifferent 237
Delta Neutral 238
Trading Implied Volatility 241
Conclusions 247
CHAPTER 13 Delta-Neutral Trading: Trading Realized Volatility 253
Gamma Scalping 254
Art and Science 258
Gamma, Theta, and Volatility 259
Gamma Hedging 259
Smileys and Frowns 265
CHAPTER 14 Studying Volatility Charts 269
Nine Volatility Chart Patterns 269
Note 282
PART IV: ADVANCED OPTION TRADING
CHAPTER 15 Straddles and Strangles 285
Long Straddle 285
Short Straddle 293
Synthetic Straddles 298
Long Strangle 299
A top options trader details a practical approach for pricing and trading options in any market condition
The options market is always changing, and in order to keep up with it you need the greeks--delta, gamma, theta, vega, and rho--which are the best techniques for valuing options and executing trades regardless of market conditions. In the Second Edition of Trading Options Greeks, veteran options trader Dan Pasarelli puts these tools in perspective by offering fresh insights on option trading and valuation.
An essential guide for both professional and aspiring traders, this book explains the greeks in a straightforward and accessible style. It skillfully shows how they can be used to facilitate trading strategies that seek to profit from volatility, time decay, or changes in interest rates. Along the way, it makes use of new charts and examples, and discusses how the proper application of the greeks can lead to more accurate pricing and trading as well as alert you to a range of other opportunities.
* Completely updated with new material
* Information on spreads, put-call parity and synthetic options, trading volatility, and advanced option trading is also included
* Explores how to exploit the dynamics of option pricing to improve your trading
Having a comprehensive understanding of the greeks is essential to long-term options trading success. Trading Options Greeks, Second Edition shows you how to use the greeks to find better trades, effectively manage them, and ultimately, become more profitable.
The options market is always changing, and in order to keep up with it you need the greeks--delta, gamma, theta, vega, and rho--which are the best techniques for valuing options and executing trades regardless of market conditions. In the Second Edition of Trading Options Greeks, veteran options trader Dan Pasarelli puts these tools in perspective by offering fresh insights on option trading and valuation.
An essential guide for both professional and aspiring traders, this book explains the greeks in a straightforward and accessible style. It skillfully shows how they can be used to facilitate trading strategies that seek to profit from volatility, time decay, or changes in interest rates. Along the way, it makes use of new charts and examples, and discusses how the proper application of the greeks can lead to more accurate pricing and trading as well as alert you to a range of other opportunities.
* Completely updated with new material
* Information on spreads, put-call parity and synthetic options, trading volatility, and advanced option trading is also included
* Explores how to exploit the dynamics of option pricing to improve your trading
Having a comprehensive understanding of the greeks is essential to long-term options trading success. Trading Options Greeks, Second Edition shows you how to use the greeks to find better trades, effectively manage them, and ultimately, become more profitable.