Trading Options for Edge

If you have experience in option trading, or a strong understanding of the options markets, but want to better understand how to trade given certain market conditions, this is the book for you. Many people have some knowledge of trading strategies, but have no idea how to pull it all together.

Mark Sebastian's latest book will teach trade evaluation, using Greeks, trading various spreads under different market conditions, portfolio-building, and risk management. Sebastian's approach will help traders understand how to find edge, what kind of trade under what conditions will capture edge, and how to create and successfully hedge to help you build your own personal Goldman Sachs or Merrill Lynch. The book demonstrates how to structure a portfolio of trades that makes more money with less risk.

Click here to watch the author's interviews with Fox Business and Nasdaq:

http://video.foxbusiness.com/v/5759956686001/

https://youtu.be/dOEJ118vMnA

Autorentext

Mark Sebastian is the CIO of Karman Line Capital and founder of Option Pit LLC, and a former member of both the Chicago Board Options Exchange and the American Stock Exchange. He is the author of the trading manual The Option Traders Hedge Fund and a frequent guest on CNBC, Fox Business News, Bloomberg, as well as a contributor to The Street's Real Money Pro. He has been published nationally including on Yahoo Finance, and quoted in the Wall Street Journal, Forbes, Reuters, and Bloomberg. Mark has spoken for the Options Industry Council, CBOE, ISE, CME, and is a co-host on the Option Block podcast and Volatility Views podcast. He has a Bachelor's in Science from Villanova University.

Inhalt

Part I: Professional Lessons Every Trader Needs to Know 1

Chapter 1: Trading in Options 3

The TOMIC 4

Build an Infrastructure 5

Build a Trading Plan 6

Select Trades Based on Articulated Criteria 7

Manage Risks 8

Learn All the Essential Elements of Trading 9

Chapter 2: Risk Management 11

The Pricing Model 12

Delta 12

Change in Underlying Price 14

Change in Strike Price 15

Time to Expiration 15

Volatility 16

Gamma 17

Price of the Underlying 19

Strike Price 20

Time to Expiration 20

Volatility 22

Vega 25

Price of the Underlying 25

Strike Price 26

Time to Expiration 27

Volatility 28

Theta 29

Price of the Underlying 29

Strike Price 30

Time to Expiration 33

Chapter 3: Market Makers, Risk, and the Individual Trader 35

How Market Makers Make Money 35

Skew 38

Term Structure 39

Market Maker Size 39

Market Maker Global Risk 41

Chapter 4: Volatility 43

Realized Volatility 43

Zone 1 Ultralow Volatility 43

Zone 2 46

Zone 3 47

Zone 4 50

Implied Volatility 51

Zone 1 52

Zone 2 52

Zone 3 53

Zone 4 54

Chapter 5: What Is Edge? 57

Edge 57

10 Day HV 58

20 Day HV 59

60 Day HV 59

Review the IV of the Product 60

IV30 61

Term Structure 62

Skew 63

Know the Zone of the Market 65

Select the Trade 67

Chapter 6: Locking in Edge 69

The Retail Trader 70

Establish the Option You Want to Execute 70

Establish the Offsetting Contract 71

The Hard and Soft Side of a Trade 71

Execute, Manage, Exit 73

Part II: Using Spreads 75

Chapter 7: A Quick Review of Spreads 77

The Call Spread 77

The Put Spread 79

The Straddle 82

Short Straddle 83

The Strangle 85

The Iron Butterfly 87

The Short Iron Butterfly 87

The Long Iron Butterfly 91

Standard Butterfly 92

The Iron Condor 94

The Short Iron Condor 94

The Calendar Spread 97

The Long Calendar 97

Short Calendar 99

Front and Back Spreads 100

Back Spreads 100

The Front Spread 101

Chapter 8: Adding Edge to Spreads 105

Credit/Debit Spreads 105

Volatility 108

Skew 110

Management 113

A Few Words on Adjusting 115

Chapter 9: Butterflies and Condors 117

The Butterfly 117

Trading a Butterfly 119

Targeting Profit in a Butterfly 124

Condors 124

Strangle 125

IV and HV 126

Skew 128

Set Up and Management 129

Chapter 10: The Front Spread 131

What Is a Front Spread? 131

Creating a Front Spread 132

IV 133

Skew 136

HV 137

The Broken Wing Butterfly 138

Trade Management 139

Aggressive Management 139

Passive Management 139

Beginning of Front Spread in TSLA 140

Target Profit 142

Broken Wing Butterfly Variation 142

Chapter 11: Calendar Spreads 145

Creating a Calendar 146

Evaluate Overall Implied Volatility 147

Evaluate Term Structure 148

Evaluate Event Risk 149

Evaluate Realized Volatility 150

Choose the Right Strikes 151

Execute the Trade 152

Manage the Trade 154

Exit 154

Part III: Gobal Risk 155

Chapter 12: How a Market Maker Trades 157

Market Making 157

The Trader 160

Step 1 161

Step 2 161

Step 3 161

Step 4 162

Chapter 13: Portfolio Greeks 165

Delta 165

Gamma 166

Theta and Vega 167

Theta 167

Vega 168

Managing a Book 172

Chapter 14: Crisis Alpha 175

Defining a Market Crisis 175

Lehman Brothers Bankruptcy 176

VIX Term Structure Determines 'Value' for VIX Derivatives 177

Crisis Alpha Approaches 179

Approach 1: Tactical Long VIX 179

Approach 2: Low Cost-of-Carry Options Structures 182

Exit Strategy 184

Part IV: Appendices 185

Appendix A: Important Terms 187

Historical Volatility (HV) 187

Short-Term Historical Volatility 187

Intermediate-Term Historical Volatility 188

Long-Term Historical Volatility 189

Realized Volatility (RV) 190

Forward Volatility 192

Implied Volatility (IV) 192

Calls and Puts 193

Skew 194

Term Structure 196

Volatility Index (VIX) 197

Delta 198

Gamma 199

Theta 201

Vega 202

Appendix B: Best Blogs 205

Index 207