Trading Option Greeks : How Time, Volatility, and Other Pricing Factors Drive Profit

by Dan Passarelli; Foreword by: William J. Brodsky

• ISBN13: 9780470885192
• ISBN10: 047088519X
• Format: eBook
• Copyright: 2010-05-01
• Publisher: Bloomberg Press

Summary

Veteran options trader Dan Passarelli explains a new methodology for option trading and valuation. With an introduction to option basics as well as chapters on all types of spreads, put-call parity and synthetic options, trading volatility and studying volatility charts, and advanced option trading, Trading Option Greeks holds pertinent new information on how more accurate pricing can drive profit.Most options traders focus on strategies such as covered calls, vertical spreads, butterflies and condors, and so on. But traders often don't know how to use the "greeks"-the five factors that influence an option's price-to trade more effectively.The "greeks" (Delta, Gamma, Theta, Vega, Rho) are tools to measure minute changes in an option's price based on corresponding changes in: Interest rates Time to expiration Price changes in the underlying security Volatility DividendsUsing the greeks can lead to more accurate pricing information that will alert an option trader to mispriced derivatives that can be exploited for profit. In straightforward language and making use of charts and examples, Passarelli explains how to use the greeks to be a better options trader.

Table of Contents

Acknowledgments

Foreword

Introduction

The Basics of Option Greeks

The Basics

Greek Philosophy

Understanding Volatility

Option-Specific Risk and Opportunity

An Introduction to Volatility-Selling Strategies

Put-Call Parity and Synthetics

Rho

Dividends and Option Pricing

Spreads

Vertical Spreads

Wing Spreads: Condors and Butterflies

Calendar and Diagonal Spreads

Volatility

Delta-Neutral Trading: Trading Implied Volatility

Delta-Neutral Trading: Trading Realized Volatility

Studying Volatility Charts

Advanced Option Trading

Straddles and Strangles

Complex Spreads

The Trader's Thought Process

Index

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