Euan Sinclair – Option Trading. Pricing & Volatility Strategies & Technique

Description

An A to Z choices buying and selling information for the brand new millennium and the brand new economic system

Written by skilled dealer and quantitative analyst Euan Sinclair, Option Trading is a complete information to this self-discipline protecting all the things from historic background, contract varieties, and market construction to volatility measurement, forecasting, and hedging strategies.

This complete information presents the element and sensible info that skilled choice merchants want, whether or not they’re utilizing choices to hedge, handle cash, arbitrage, or have interaction in structured finance offers. It comprises info important to anybody on this area, together with choice pricing and value forecasting, the Greeks, implied volatility, volatility measurement and forecasting, and particular choice methods.

• Explains the right way to break down a typical place, and restore positions
• Other titles by Sinclair:Volatility Trading
• Addresses the assorted considerations of the professional choices trader

Option buying and selling will proceed to be an vital a part of the monetary panorama. This ebook will present you the right way to profit from these worthwhile merchandise, it doesn’t matter what the market does.

Table of Contents

Preface.

Professional Trading.

The Role of Mathematics.

The Structure of this Book.

Acknowledgments.

Chapter 1 History.

Summary.

Chapter 2 Introduction to Options.

Options.

Specifications for an Option Contract.

Uses of Options.

Market Structure.

Summary.

Chapter 3 Arbitrage Bounds for Option Prices.

American Options Compared to European Options.

Absolute Maximum and Minimum Values.

Summary.

Chapter 4 Pricing Models.

General Modeling Principles.

Choice of Dependent Variables.

The Binomial Model.

The Black-Scholes-Merton (BSM) Model.

Summary.

Chapter 5 The Solution of the Black-Scholes-Merton (BSM) Equation.

Delta.

Gamma.

Theta.

Vega.

Summary.

Chapter 6 Option Strategies.

Forecasting and Strategy Selection.

The Strategies.

Summary.

Chapter 7 Volatility Estimation.

Defining and Measuring Volatility.

Forecasting Volatility.

Volatility in Context.

Summary.

Chapter 8 Implied Volatility.

The Implied Volatility Curve.

Parameterizing and Measuring the Implied Volatility Curve.

The Implied Volatility Curve as a Function of Expiration.

Implied Volatility Dynamics.

Summary.

Chapter 9 General Principles of Trading and Hedging.

Edge.

Hedging.

Trade Sizing and Leverage.

Scalability and Breadth.

Summary.

Chapter 10 Market Making Techniques.

Market Structure.

Market Making.

Trading Based on Order-Book Information.

Summary.

Chapter 11 Volatility Trading.

Hedging.

Hedging in Practice.

The P/L Distribution of Hedged Option Positions.

Summary.

Chapter 12 Expiration Trading.

Pinning.

Pin Risk.

Forward Risk.

Exercising the Wrong Options.

Irrelevance of the Greeks.

Expiring at a Short Strike.

Summary.

Chapter 13 Risk Management.

Example of Position Repair.

Inventory.

Delta.

Gamma.

Vega.

Correlation.

Rho.

Stock Risk: Dividends and Buy-in Risk.

The Early Exercise of Options.

Summary.

Conclusion.

Appendix A Distributions.

Example.

Moments and the “Shape” of Distributions.

Appendix B Correlation.

Glossary.

Index.

Author Information

EUAN SINCLAIR is an choice dealer with fifteen years {of professional} buying and selling expertise. He specializes within the design and implementation of quantitative buying and selling methods. Sinclair is at the moment a proprietary choice dealer for Bluefin Trading, the place he trades primarily based on quantitative fashions of his personal design. He holds a PhD in theoretical physics from the University of Bristol. Sinclair can also be the creator of the Wiley title Volatility Trading.