What is included with this book?
Acknowledgments | p. xv |
Introduction: Learning to Trade Options as a Professional | p. xvii |
Option Market Fundamentals | p. 1 |
Fundamental Terms | p. 1 |
The Market-Definition 1 | p. 10 |
The Market-Definition 2 | p. 11 |
National Best Bid and Best Offer | p. 13 |
Margin Accounts and Related Terms | p. 16 |
Profit/Loss Diagrams | p. 19 |
Summary | p. 29 |
Operating the Op-Eval Pro Software | p. 31 |
Overview of Program Features | p. 31 |
Installing the Software | p. 32 |
Choices of Pricing Formulas | p. 34 |
Features of Op-Eval Pro | p. 35 |
The Single Option Calculator | p. 36 |
Calculating Implied Volatility | p. 39 |
The Spread Positions Screen | p. 39 |
Theoretical Graph Screen | p. 42 |
Theoretical Price Table | p. 44 |
The Portfolio Screen | p. 45 |
The Distribution Screen | p. 46 |
Summary | p. 48 |
The Basics of Option Price Behavior | p. 49 |
The Insurance Analogy | p. 49 |
Option Pricing Formulas | p. 53 |
Call Values and Stock Prices | p. 54 |
Put Values and Stock Prices | p. 56 |
Call Values Relative to Put Values | p. 59 |
Option Values and Strike Price | p. 60 |
Option Values and Time to Expiration | p. 62 |
Time Decay Is Complicated | p. 64 |
Time Decay and Volatility | p. 64 |
Option Values and Interest Rates | p. 67 |
Option Values and Dividends | p. 69 |
Option Values and Volatility | p. 69 |
Extreme Volatility | p. 71 |
Dynamic Markets | p. 71 |
Three-Part Forecasts | p. 72 |
Trading Scenarios | p. 72 |
Summary | p. 75 |
The Greeks | p. 77 |
Overview | p. 77 |
Delta | p. 78 |
Gamma | p. 80 |
Vega | p. 83 |
Theta | p. 85 |
Rho | p. 87 |
How the Greeks Change | p. 89 |
How Delta Changes | p. 92 |
How Gamma Changes | p. 99 |
How Vega Changes | p. 104 |
How Theta Changes | p. 108 |
How Rho Changes | p. 111 |
Position Greeks | p. 118 |
Summary | p. 131 |
Synthetic Relationships | p. 135 |
Synthetic Relationships | p. 135 |
Synthetic Long Stock | p. 137 |
Synthetic Short Stock | p. 139 |
Synthetic Long Call | p. 141 |
Synthetic Short Call | p. 144 |
Synthetic Long Put | p. 146 |
Synthetic Short Put | p. 148 |
When Stock Price [not equal] Strike Price | p. 151 |
The Put-Call Parity Equation | p. 153 |
Applying the Effective Stock Price Concept | p. 155 |
The Role of Interest Rates and Dividends | p. 156 |
Summary | p. 160 |
Arbitrage Strategies | p. 163 |
Arbitrage-the Concept | p. 163 |
The Conversion | p. 165 |
Pin Risk | p. 167 |
Pricing a Conversion | p. 168 |
Pricing a Conversion with Dividends | p. 173 |
Pricing Conversions by Strike Price | p. 176 |
The Concept of Relative Pricing | p. 177 |
The Reverse Conversion | p. 178 |
Pricing a Reverse Conversion | p. 181 |
Pricing a Reverse Conversion with Dividends | p. 185 |
Box Spreads | p. 188 |
The Long Box Spread | p. 188 |
Pricing a Long Box Spread | p. 193 |
The Short Box Spread | p. 196 |
Pricing a Short Box Spread | p. 199 |
Summary | p. 203 |
Volatility | p. 205 |
Volatility Defined | p. 206 |
Historic Volatility | p. 206 |
Another Look at Daily Returns | p. 213 |
Realized Volatility | p. 216 |
The Meaning of "30 Percent Volatility" | p. 216 |
Converting Annual Volatility to Different Time Periods | p. 217 |
Calendar Days Versus Trading Days | p. 220 |
Implied Volatility | p. 222 |
Expected Volatility | p. 230 |
Using Volatility | p. 231 |
"Overvalued" and "Undervalued" | p. 232 |
An Alternative Focus | p. 234 |
Volatility Skews | p. 234 |
Summary | p. 238 |
Delta-Neutral Trading: Theory and Reality | p. 241 |
Delta-Neutral Defined | p. 242 |
The Theory of Delta-Neutral Trading | p. 247 |
Delta-Neutral Trading-Long Volatility Example | p. 248 |
Delta-Neutral-Trading-Short Volatility Example | p. 256 |
Simulated "Real" Delta-Neutral Trade 1 | p. 263 |
Simulated "Real" Delta-Neutral Trade 2 | p. 267 |
Delta-Neutral Trading-Opportunities and Risks for Speculators | p. 272 |
Delta-Neutral Trading-Opportunities and Risks for Market Makers | p. 275 |
Summary | p. 277 |
Setting Bid-Ask Prices | p. 279 |
The Theory of the Bid-Ask Spread | p. 280 |
The Need to Adjust Bid and Ask Prices | p. 284 |
The Process of Adjusting Bid and Ask Prices | p. 285 |
The Limit on Adjusting Bid and Ask Prices | p. 288 |
Estimating Option Prices as Volatility Changes | p. 290 |
Expressing Bid and Ask Prices in Volatility Terms | p. 292 |
Trading Exercises Introduced | p. 294 |
Exercise 1: Buying Calls Delta-Neutral | p. 296 |
Exercise 2: Creating a Butterfly Spread in Three Trades | p. 298 |
Exercise 3: Creating a Reverse Conversion in Two Trades | p. 302 |
Exercise 4: Creating a Long Box Spread in Two Trades | p. 306 |
Summary | p. 310 |
Managing Position Risk | p. 311 |
Calculating Position Risks | p. 312 |
Managing Directional Risk with Delta | p. 314 |
Vertical Spreads versus Outright Long Options | p. 320 |
Vertical Spreads-How the Risks Change | p. 321 |
Greeks of Delta-Neutral Positions | p. 327 |
Neutralizing Position Greeks | p. 329 |
Neutralizing Greeks when Interest Rates Are Positive | p. 333 |
Establishing Risk Limits | p. 337 |
Summary | p. 340 |
Epilogue | p. 343 |
Index | p. 345 |
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