Volatility Edge in Options Trading, The: New Technical Strategies for Investing in Unstable Markets

Series
Financial Times
Author
Jeff Augen  
Publisher
Pearson
Cover
Softcover
Edition
1
Language
English
Total pages
304
Pub.-date
January 2008
ISBN13
9780133925401
ISBN
0133925404
Related Titles


Product detail

Product Price CHF Available  
9780133925401
Volatility Edge in Options Trading, The: New Technical Strategies for Investing in Unstable Markets
55.90

Description

In The Volatility Edge, options trader and researcher Jeff Augen introduces a breakthrough strategy for fully leveraging the immense opportunities that arise from market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques and visual tools that every experienced options trader can use. For the first time, Augen bridges the gap between pricing theory mathematics and market realities, providing new data visualization tools and analytical techniques for studying historical price change behavior, making more profitable trading decisions, and systematically managing and mitigating risk. Augen covers topics addressed in no other options trading book, introducing innovative new strategies for exploiting rising volatility that precedes most earnings releases; trading the monthly options expiration cycle; leveraging put:call price parity disruptions; understanding the impact of weekend and end-of-month timeframes on bid-ask spreads; and using the CBOE Volatility Index (VIX) more effectively. Unlike conventional guides, The Volatility Edge doesn't rely on oversimplified, artificial positional analyses: it reflects ongoing changes in the prices of underlying securities, market volatility, and time decay.

Features

For the first time, learn how to take full advantage of market volatility and profit while others are running for cover

 

  • Learn an all new, breakthrough strategy for profiting by trading options in volatile markets.
  • Includes practical, detailed guidance on tools you can use to determine when to buy and when to sell.
  • Information available nowhere else: based on more than a decade of advanced research by one of the most successful private option traders.
  • Table of Contents

    Acknowledgments . . . xi

    About the Author . . . xii

    Preface . . . xiii

    A Guide for Readers . . . xv

    1. Introduction . . . 1

    Price Discovery and Market Stability . . . 6

    Practical Limitations of Technical Charting . . . 9

    Background and Terms . . . 12

    Securing a Technical Edge . . . 16

    Endnote  . . . 21

    2. Fundamentals of Option Pricing . . . 23

    Random Walks and Brownian Motion . . . 25

    The Black-Scholes Pricing Model . . . 29

    The Greeks: Delta, Gamma, Vega, Theta, and Rho . . . 32

    Binomial Trees: An Alternative Pricing Model  . . . 42

    Summary . . . 45

    Further Reading  . . . 45

    Endnotes . . . 46

    3. Volatility . . . 47

    Volatility and Standard Deviation . . . 48

    Calculating Historical Volatility . . . 50

    Profiling Price Change Behavior . . . 61

    Summary . . . 75

    Further Reading . . . 76

    4. General Considerations . . . 77

    Bid-Ask Spreads . . . 79

    Volatility Swings . . . 82

    Put-Call Parity Violations  . . . 89

    Liquidity . . . 91

    Summary . . . 95

    Further Reading  . . . 97

    Endnotes . . . 97

    5. Managing Basic Option Positions . . . 99

    Single-Sided Put and Call Positions . . . 100

    Straddles and Strangles . . . 118

    Covered Calls and Puts  . . . 137

    Synthetic Stock . . . 143

    Summary . . . 146

    Further Reading . . . 148

    Endnotes . . . 149

    6. Managing Complex Positions . . . 151

    Calendar and Diagonal Spreads . . . 152

    Ratios . . . 162

    Ratios That Span Multiple Expiration Dates . . . 175

    Complex Multipart Trades . . . 182

    Hedging with the VIX . . . 195

    Summary . . . 202

    Further Reading . . . 203

    Endnotes . . . 204

    7. Trading the Earnings Cycle . . . 205

    Exploiting Earnings-Associated Rising Volatility . . . 207

    Exploiting Post-Earnings Implied Volatility Collapse . . . 21

    Author

    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).