Option Trading : Pricing and Volatility Strategies and Techniques

by Euan Sinclair

ISBN13:
9780470642511
ISBN10:
0470642513
Format: eBook
Copyright: 2010-07-01
Publisher: Wiley
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Summary

An A to Z options trading guide for the new millennium and the new economyWritten 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 traderOption 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.

Preface
Professional Trading
The Role of Mathematics
The Structure of this Book
Acknowledgments
History
Summary
Introduction to Options
Options
Specifications for an Option Contract
Uses of Options
Market Structure
Summary
Arbitrage Bounds for Option Prices
American Options Compared to European options
Absolute Maximum and Minimum Values
Summary
Pricing Models
General Modeling Principles
Choice of Dependent Variables
The Binomial Model
The Black-Scholes-Merton (BSM) Model
Summary
The Solution of the Black-Scholes-Merton (BSM) Equation
Delta
Gamma
Theta
Vega
Summary
Option Strategies
Forecasting and Strategy Selection
The Strategies
Summary
Volatility Estimation
Defining and Measuring Volatility
Forecasting Volatility
Volatility in Context
Summary
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
General Principles of Trading and Hedging
Edge
Hedging
Trade Sizing and Leverage
Scalability and Breadth
Summary
Market Making Techniques
Market Structure
Market Making
Trading Based on Order-Book Information
Summary
Volatility Trading
Hedging
Hedging in Practice
The P/L Distribution of Hedged Option Positions
Summary
Expiration Trading
Pinning
Pin Risk
Forward Risk
Exercising the Wrong Options
Irrelevance of the Greeks
Expiring at a short Strike
Summary
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
Distributions
Example
Moments and the "Shape" of Distributions
Correlation
Glossary
Index
Table of Contents provided by Publisher. All Rights Reserved.

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