Increasing Alpha with Options




Increasing Alpha with Options: Trading Strategies Using Technical Analysis and Market Indicators

Filled with in-depth insights and expert advice, Increasing Alpha with Options will quickly familiarize you with everything from the various elements of technical analysis to leveraging the power of options, and show you how applying these tools and techniques to your trading or investing endeavors can improve overall performance.

Author’s Introduction:

In this new world of investing, managers deal with a variety of dynamics, products, analyses, and risk controls. As ever, professional managers concern themselves with resource availability and cost as they chase above benchmark performance and profits— called alpha — and compete against other managers for new investment dollars. Many investment managers focus on performance during most of their waking hours.

In doing so, they seek to balance risk against the possibility of reward. Investment managers have always done this, of course, but the job grew more complicated during the 1990s, when hedge funds and mutual funds grew increasingly popular. The latter part of the decade, particularly in the United States, was characterized by impressive market performance, the result of growth in technology and the Internet, as well as fi nancial service sector expansion.

Hedge and mutual funds paid top managers attractive compensation, which helped increase both the number of funds and the competition among them.

Hedge and mutual funds examined every aspect of their businesses, trying to maximize growth and performance. Many developed new techniques. Some of these resulted from new products, such as exchange – traded funds (ETF). Others came from new analysis applications, such as pair trades that are derived from quantitative comparisons of two or more companies within the same group. Fund managers expanded the ways they used arbitrage, short selling, and other traditional strategies.

More and more funds were managed from the United States and Europe, though many were registered in other countries, allowing managers
to attract more money from overseas and pay lower taxes.

The best – performing funds attracted more capital than their competition, boosting managers ’ compensation even higher. Chasing ever – better returns, some fund managers deviated from their normal practices and directives, overleveraging and taking on extra risk. Sometimes that risk was excessive or highly concentrated in a single market, sector, industry group, or security.

Markets collapsed from the subprime mortgage crisis, which resulted in a sharp sell – off and contraction in the credit markets. Most funds lost money; those that were overleveraged and had taken on additional risk often lost more than did their more conservative fellows. Some went out of business, while others faced dwindling client bases.

Derivatives strategists — including me — learned a lot from this period. Strategists saw that new strategies — and new uses of older strategies can help investors generate better profits at lower risk levels. In this book, I will examine useful analytical techniques, showing readers how to create alpha — profits — while also protecting positions from adverse market changes.


  • Why Technical Analysis?
  • The Basics of Technical Analysis
  • Trends and Their Ends
  • Building Strategies around Reversal and Continuation Patterns
  • Oscillators
  • Oscillators and Strategies
  • Relative Performance
  • ETF Strategies
  • Effi cient Pricing—Mostly
  • The Subprime Mortgage Crisis and Options
  • The Other Greeks
  • When Conditions Change
  • The Changing Environment
  • Using Options to Protect Capital
  • Hedging the Broad Portfolio
  • When to Invest, When to Trade
  • All About Resources

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