How to Calculate Options Prices and Their Greeks: Exploring the Black Scholes Model from Delta to Vega

How to Calculate Options Prices and Their Greeks is the only book of its kind, showing you how to value options and the greeks according to the Black Scholes model but also how to do this without consulting a model. You’ll build a solid understanding of options and hedging strategies as you explore the concepts of probability, volatility, and put call parity, then move into more advanced topics in combination with a four-dimensional approach of the change of the P&L of an option portfolio in relation to strike, underlying, volatility, and time to maturity. This informative guide fully explains the distribution of first and second order Greeks along the whole range wherein an option has optionality, and delves into trading strategies, including spreads, straddles, strangles, butterflies, kurtosis, vega-convexity , and more. Charts and tables illustrate how specific positions in a Greek evolve in relation to its parameters, and digital ancillaries allow you to see 3D representations using your own parameters and volumes.

Introduction:

How to Calculate Options Prices and Their Greeks gives options traders, risk managers, fund managers, and private investors an in-depth guide for valuing and understanding options and “the Greeks”. This important resource explains the ins and outs of the commonly used Black and Scholes model that is appreciated for its simplicity and ability to generate a fair value for options pricing in all kinds of markets as well as how to calculate/approximate values for options and the Greeks without applying a model. The author outlines a practical approach for using the strengths of the Black and Scholes model to understand, set up, and effectively manage an option position.

The author explains, step by step the most effective options and hedging strategies. While other resources rely on an ineffective two dimensional approach to investing in options, Ursone takes a practical, four-dimensional approach that puts the emphasis on the distribution of the Greeks. Greeks measure the sensitivity of the value of an option with regards to changes in parameters like the strike, underlying (Future), volatility (measure of the variation of the underlying), time to expiry or maturity and the interest rate. Any change in one of the parameters will directly result in a change in the Greeks and will have an impact on the P&L of an options portfolio. The author therefore accentuates an understanding of the Greeks as a prerequisite for trading and managing an options portfolio.

This informative guide explains the distribution of first and second order Greeks along the whole range wherein an option has optionality, and delves into trading strategies, including spreads, straddles, strangles, butterflies, kurtosis, vega-convexity, and more. The book’s illustrative charts and tables clearly show how specific positions in a Greek evolve in relation to its parameters.

How to Calculate Options Prices and Their Greeks offers traders at all levels effective strategies that eschew the simplistic two dimensional approach of P&L versus underlying and shows how the Greeks can make a world of difference over the lifetime of an options portfolio. How to Calculate Options Prices and Their Greeks is a comprehensive guide to a thorough and more effective understanding of options, their Greeks, and managing option strategies.

Contents:

• THE NORMAL PROBABILITY DISTRIBUTION
• VOLATILITY
• PUT CALL PARITY
• DELTA Δ
• PRICING
• DELTA II
• GAMMA
• VEGA
• THETA
• SKEW
• SPREADS
• BUTTERFLY
• STRATEGIES

How to Calculate Options Prices and Their Greeks: Exploring the Black Scholes Model from Delta to Vega By Pierino Ursone pdf