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

by Dan Passarelli; Foreword by: William J. Brodsky

• ISBN13: 9781576602461
• ISBN10: 157660246X
• Format: Hardcover
• Copyright: 2008-07-01
• Publisher: Bloomberg Pr

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

The basics	p. 3
Greek philosophy	p. 23
Understanding volatility	p. 53
Option-specific risk and opportunity	p. 71
An introduction to volatility-selling strategies	p. 92
Put-call parity and synthetics	p. 110
Rho	p. 132
Dividends and option pricing	p. 141
Vertical spreads	p. 157
Wing spreads : condors and butterflies	p. 178
Calendar and diagonal spreads	p. 201
Delta-neutral trading : trading implied volatility	p. 231
Delta-neutral trading : trading realized volatility	p. 247
Studying volatility charts	p. 264
Straddles and strangles	p. 281
Complex spreads	p. 304
The trader's thought process	p. 321
Index	p. 326
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