Option Trading: Pricing and Volatility Strategies and Techniques

ISBN-13: 9780470497104 / Angielski / Twarda / 2010 / 320 str.

Euan Sinclair

Opis

An A to Z options trading guide for the new millennium and the new economy Written by professional trader and quantitative analyst Euan Sinclair, Option Trading is a comprehensive guide to this discipline covering everything from historical background, contract types, and market structure to volatility measurement, forecasting, and hedging techniques. This comprehensive guide presents the detail and practical information that professional option traders need, whether they're using options to hedge, manage money, arbitrage, or engage in structured finance deals. It contains information essential to anyone in this field, including option pricing and price forecasting, the Greeks, implied volatility, volatility measurement and forecasting, and specific option strategies.

• Explains how to break down a typical position, and repair positions
• Other titles by Sinclair: Volatility Trading
• Addresses the various concerns of the professional options trader

Option trading will continue to be an important part of the financial landscape. This book will show you how to make the most of these profitable products, no matter what the market does.

Spis treści

Preface.

Professional Trading.

The Role of Mathematics.

The Structure of this Book.

Acknowledgments.

Chapter 1 History.

Summary.

Chapter 2 Introduction to Options.

Options.

Specifications for an Option Contract.

Uses of Options.

Market Structure.

Summary.

Chapter 3 Arbitrage Bounds for Option Prices.

American Options Compared to European Options.

Absolute Maximum and Minimum Values.

Summary.

Chapter 4 Pricing Models.

General Modeling Principles.

Choice of Dependent Variables.

The Binomial Model.

The Black–Scholes–Merton (BSM) Model.

Summary.

Chapter 5 The Solution of the Black–Scholes–Merton (BSM) Equation.

Delta.

Gamma.

Theta.

Vega.

Summary.

Chapter 6 Option Strategies.

Forecasting and Strategy Selection.

The Strategies.

Summary.

Chapter 7 Volatility Estimation.

Defining and Measuring Volatility.

Forecasting Volatility.

Volatility in Context.

Summary.

Chapter 8 Implied Volatility.

The Implied Volatility Curve.

Parameterizing and Measuring the Implied Volatility Curve.

The Implied Volatility Curve as a Function of Expiration.

Implied Volatility Dynamics.

Summary.

Chapter 9 General Principles of Trading and Hedging.

Edge.

Hedging.

Trade Sizing and Leverage.

Scalability and Breadth.

Summary.

Chapter 10 Market Making Techniques.

Market Structure.

Market Making.

Trading Based on Order–Book Information.

Summary.

Chapter 11 Volatility Trading.

Hedging.

Hedging in Practice.

The P/L Distribution of Hedged Option Positions.

Summary.

Chapter 12 Expiration Trading.

Pinning.

Pin Risk.

Forward Risk.

Exercising the Wrong Options.

Irrelevance of the Greeks.

Expiring at a Short Strike.

Summary.

Chapter 13 Risk Management.

Example of Position Repair.

Inventory.

Delta.

Gamma.

Vega.

Correlation.

Rho.

Stock Risk: Dividends and Buy–in Risk.

The Early Exercise of Options.

Summary.

Conclusion.

Appendix A Distributions.

Example.

Moments and the Shape of Distributions.

Appendix B Correlation.

Glossary.

Index.

O autorze

EUAN SINCLAIR is an option trader with fifteen years of professional trading experience. He specializes in the design and implementation of quantitative trading strategies. Sinclair is currently a proprietary option trader for Bluefin Trading, where he trades based on quantitative models of his own design. He holds a PhD in theoretical physics from the University of Bristol. Sinclair is also the author of the Wiley title Volatility Trading.

Blurb

Successful trading, in general, is difficult and options specifically can be complicated. In most cases, those who do well have an ability to focus on good processes and let the results take care of themselves.

Nobody is more familiar with this situation than professional trader and quantitative analyst Euan Sinclair. In Option Trading, he′s broken down the process into the parts you need to thrive an understanding of market structure, knowledge of the instruments you trade, a way to capture an edge, and a methodology for managing risk.

Written with the serious trader in mind, this comprehensive guide opens by exploring options, both historically and conceptually, and then uses the no–arbitrage principle to introduce option pricing examining both static arbitrage relationships and the dynamic hedging approach. With this critical background in hand, the largest and most substantial part of the book addresses how to actually trade options.

Along the way, you′ll gain an in–depth understanding of:

• The various option strategies that can be implemented, from puts and calls to strangles, straddles, and butterflies
• How to measure and forecast realized volatility, the nature and behavior of implied volatility, and what it takes to successfully trade the two
• The concept of expected value, the general idea of hedging, and the importance of trade sizing
• The strategies behind market making
• The essential aspects of risk management in option trading
• And much more

Option trading is an important part of the financial landscape. This book will show you how to make the most of these profitable products, no matter what the market does.