The Volatility Edge in Options... | Buy

Summary

In The Volatility Edge in Options Trading, leading options trader Jeff Augen introduces breakthrough strategies for identifying subtle price distortions that arise from changes in market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques that every experienced options trader can use to study historical price changes, mitigate risk, limit market exposure, and structure mathematically sound high-return options positions. Augen bridges the gap between pricing theory mathematics and market realities, covering topics addressed in no other options trading book. He introduces new ways to exploit the rising volatility that precedes earnings releases; trade the monthly options expiration cycle; leverage put:call price parity disruptions; understand weekend and month-end effects on bid-ask spreads; and use options on the CBOE Volatility Index (VIX) as a portfolio hedge. Unlike conventional guides, The Volatility Edge in Options Trading doesn't rely on oversimplified positional analyses: it fully reflects ongoing changes in the prices of underlying securities, market volatility, and time decay. What's more, Augen shows how to build your own customized analytical toolset using low-cost desktop software and data sources: tools that can transform his state-of-the-art strategies into practical buy/sell guidance.

Author Biography

JEFF AUGEN, currently a private investor and writer, has spent over a decade building a unique intellectual property portfolio of algorithms and software for technical analysis of derivatives prices. His work includes over one million lines of computer code refl ecting powerful new strategies for trading equity, index, and futures options. As co-founding executive of IBM’s Life Sciences Computing business, Augen defined a growth strategy resulting in $1.2B of new revenue and managed a large portfolio of venture capital investments. From 2002 to 2005, he was President and CEO of TurboWorx, Inc., a technical computing software company founded by the chairman of the Department of Computer Science at Yale University. He is author of Bioinformatics in the Post-Genomic Era: Genome, Transcriptome, Proteome, and Information-Based Medicine (Addison-Wesley, 2004).

Acknowledgments	p. xi
About the Author	p. xii
Preface	p. xiii
A Guide for Readers	p. xv
Introduction	p. 1
Price Discovery and Market Stability	p. 6
Practical Limitations of Technical Charting	p. 9
Background and Terms	p. 12
Securing a Technical Edge	p. 16
Endnote	p. 21
Fundamentals of Option Pricing	p. 23
Random Walks and Brownian Motion	p. 25
The Black-Scholes Pricing Model	p. 29
The Greeks: Delta, Gamma, Vega, Theta, and Rho	p. 32
Binomial Trees: An Alternative Pricing Model	p. 42
Summary	p. 45
Further Reading	p. 45
Endnotes	p. 46
Volatility	p. 47
Volatility and Standard Deviation	p. 48
Calculating Historical Volatility	p. 50
Profiling Price Change Behavior	p. 61
Summary	p. 75
Further Reading	p. 76
General Considerations	p. 77
Bid-Ask Spreads	p. 79
Volatility Swings	p. 82
Put-Call Parity Violations	p. 89
Liquidity	p. 91
Summary	p. 95
Further Reading	p. 97
Endnotes	p. 97
Managing Basic Option Positions	p. 99
Single-Sided Put and Call Positions	p. 100
Straddles and Strangles	p. 118
Covered Calls and Puts	p. 137
Synthetic Stock	p. 143
Summary	p. 146
Further Reading	p. 148
Endnotes	p. 149
Managing Complex Positions	p. 151
Calendar and Diagonal Spreads	p. 152
Ratios	p. 162
Ratios That Span Multiple Expiration Dates	p. 175
Complex Multipart Trades	p. 182
Hedging with the VIX	p. 195
Summary	p. 202
Further Reading	p. 203
Endnotes	p. 204
Trading the Earnings Cycle	p. 205
Exploiting Earnings-Associated Rising Volatility	p. 207
Exploiting Post-Earnings Implied Volatility Collapse	p. 216
Summary	p. 222
Endnote	p. 223
Trading the Expiration Cycle	p. 225
The Final Trading Day	p. 226
The Days Preceding Expiration	p. 237
Summary	p. 240
Further Reading	p. 242
Endnotes	p. 242
Building a Toolset	p. 243
Some Notes on Data Visualization Tools	p. 245
Database Infrastructure Overview	p. 248
Data Mining	p. 252
Statistical Analysis Facility	p. 258
Trade Modeling Facility	p. 264
Summary	p. 268
Endnotes	p. 269
Index	p. 271
Table of Contents provided by Ingram. All Rights Reserved.

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Excerpts

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