Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits

In Trading Option Greeks, seasoned options expert, Dan Passarelli provides you with the tools you’ll need to effectively implement them in your everyday trading endeavors. Written from Passarelli’s unique perspective, traders of all levels can benefit from this reliable guide. Page by page, it skillfully covers some of the most essential elements of this discipline, including various types of spreads, put-call parity and synthetic options, trading volatility, and advanced option trading issues. Along the way, it makes use of new charts and examples, and discusses how the proper application of the greeks can lead to more accurate pricing and trading as well as alert you to a range of other opportunities.

Introduction:

This book addresses the complex price behavior of options by discussing option greeks from both a theoretical and a practical standpoint. There is some tactical discussion throughout, although the objective of this book is to provide education to the reader. This book is meant to be less a how-to manual than a how-come tutorial. This informative guide will give the retail trader a look inside the mind of a professional trader. It will help the professional trader better understand the essential concepts of his craft. Even the novice trader will be able to apply these concepts to basic options strategies. Comprehensive knowledge of the greeks can help traders to avoid common pitfalls and increase profit potential.

Much of this book is broken down into a discussion of individual strategies. Although the nuances of each specific strategy are not relevant, presenting the material this way allows for a discussion of very specific situations in which greeks come into play. Many of the concepts discussed in a section on one option strategy can be applied to other option strategies.

As in the first edition of Trading Option Greeks, Chapter 1 discusses basic option concepts and definitions. It was written to be a review of the basics for the intermediate to advanced trader. For newcomers, it’s essential to understand these concepts before moving forward. A detailed explanation of option greeks begins in Chapter 2. Be sure to leave a bookmark in this chapter, as you will flip to it several times while reading the rest of the book and while studying the market thereafter. Chapter 3 introduces volatility. The same bookmark advice can be applied here, as well. Chapters 4 and 5 explore the minds of option traders. What are the risks they look out for? What are the opportunities they seek? These chapters also discuss direction-neutral and direction-indifferent trading. The remaining chapters take the reader from concept to application, discussing the strategies for nonlinear trading and the tactical considerations of a successful options trader.

New material in this edition includes updated examples, with more current price information throughout many of the chapters. More detailed discussions are also included to give the reader a deeper understanding of important topics. For example, Chapter 8 has a more elaborate explanation of the effect of dividends on option prices. Chapter 17 of this edition has new material on strategy selection, position management, and adjusting, not featured in the first edition of the book.

Contents:

• The Basics
• Greek Philosophy
• Understanding Volatility
• Option-Specific Risk and Opportunity
• An Introduction to Volatility-Selling Strategies
• Put-Call Parity and Synthetics
• Rho
• Dividends and Option Pricing
• Vertical Spreads
• Wing Spreads
• Calendar and Diagonal Spreads
• Delta-Neutral Trading: Trading Implied Volatility
• Delta-Neutral Trading: Trading Realized Volatility
• Studying Volatility Charts
• Straddles and Strangles
• Ratio Spreads and Complex Spreads
• Putting the Greeks into Action

Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits By Dan Passarelli pdf