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Index
Title Page
Copyright Page
Dedication
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
APPENDIX B - Correlation
Glossary
Index
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