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Option Trading: Pricing and Volatility Strategies and Techniques

توضیحات

Praise for Option Trading

"In this era of unprecedented volatility, it has become imperative to understand the intricacies of options markets. This book gives an unyielding trader's perspective on options trading, from the basics of option pricing to the finer points of risk management. I highly recommend it as the best book of its kind on the market."
—Peter Carr, PhD; Head of Quantitative Financial Research, Bloomberg LP, Director of the Masters in Math Finance Program, Courant Institute, NYU

"A no-nonsense instruction manual for becoming a professional options trader. This is not a theoretical account of what the author thinks markets ought to do, nor does it promise trading ideas so good you can ignore risk management, hedging, position repair, and other basic professional skills. It merely explains how professionals turn real ideas into real money."
—Aaron Brown, Risk manager at AQR Capital Management and author of The Poker Face of Wall Street

"With the release of Option Trading, Euan Sinclair has once again set a new higher standard for options literature and provides a welcome companion to his excellent Volatility Trading. Sinclair is a professional options trader and emphasizes that making profits among intelligent competitive traders requires techniques and processes that must lead to a definable, tractable, and executable edge. His most useful contribution to a field crowded with poor treatments is his insistence on not oversimplifying or waving away the option trading process because it takes accuracy, work, and thought. Yet Sinclair's clarity and technical mastery give focus where previous authors have wallowed in obscurantism to camouflage ignorance and lack of practical experience. Sinclair's Option Trading is the finest work on the subject available and makes all previous treatments obsolete."
—James N. Ward, Professor of Finance, The American University of Paris, and European Head of High Yield Investments, AXA Investment Managers–Paris


EUAN SINCLAIR is an option trader with fifteen years of professional trading experience. He specializes in the design and implementation of quantitative trading strategies. Sinclair is currently a proprietary option trader for Bluefin Trading, where he trades based on quantitative models of his own design. He holds a PhD in theoretical physics from the University of Bristol. Sinclair is also the author of the Wiley title Volatility Trading.
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.