Thomsett The Mathematics of Options

Quantifying Derivative Price, Payoff, Probability, and Risk
1. Auflage 2017
ISBN: 978-3-319-56635-1
Verlag: Springer Nature Switzerland
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 345 Seiten

Reihe: Progress in Mathematics

This book is written for the experienced portfolio manager and professional options traders. It is a practical guide offering how to apply options math in a trading world that demands mathematical measurement. 
Every options trader deals with an array of calculations: beginners learn to identify risks and opportunities using a short list of strategies, while researchers and academics turn to advanced technical manuals. However, almost no books exist for the experienced portfolio managers and professional options traders who fall between these extremes.
Michael C. Thomsett addresses this glaring gap with The Mathematics of Options, a practical guide with actionable tools for the practical application of options math in a world that demands quantification. It serves as a valuable reference for advanced methods of evaluating issues of pricing, payoff, probability, and risk. In his characteristic approachable style, Thomsett simplifies complex hot button issues-such as strategic payoffs, return calculations, and hedging options-that may be mentioned in introductory texts but are often underserved. The result is a comprehensive book that helps traders understand the mathematic concepts of options trading so that they can improve their skills and outcomes.

Michael C. Thomsett has been writing for a living since 1978 and has published more than 90 books. These include 12 options books. His best-selling Getting Started in Options has been published in nine editions and sold more than 300,000 copies. He also has developed and presented options webinars, and coaches on a live trading room every day and is a frequent speaker at trade shows and investment conventions. The author blogs on TheStreet.com, Seeking Alpha, Options Money Maker, Stockcharts.com, and social media.

Autoren/Hrsg.

Thomsett, Michael C.

Inhaltsverzeichnis

1;Foreword;5
2;Preface;8
3;Contents;11
4;List of Figures;13
5;List of Tables;15
6;Introduction—The Variability of Derivatives Trading;17
7;1 Trading Goals and Objectives;21
7.1;Basic Probability to Quantify Risk;23
7.2;The Flaws of Implied Volatility (IV);26
7.3;Articulating Risk with Technical Signals;28
7.4;Probability in an Uncertain World;32
7.5;Bollinger Bands to Create a Probability Matrix;38
7.6;Speculation Versus Hedging;44
8;2 The Role of Fundamentaland Technical Analysis;50
8.1;Analyzing the Impact of Fundamental Volatility;51
8.2;Calculating Historical Volatility;54
8.3;The Problem with Implied Volatility;56
8.4;Fundamental Volatility Correlated to Stock Price Behavior;58
8.5;The Effect of Fundamental Volatility on Options Risk;63
8.6;The Proximity Factor;64
9;3 Pricing of the Option;73
9.1;PutCall Parity;74
9.2;Upper and Lower Bounds;79
9.3;Intrinsic Value;80
9.4;Time Value;82
9.5;Extrinsic Value (Volatility);84
9.6;Estimating Delta;86
9.7;Estimating Gamma;89
9.8;Calculating Relative Option Yield;91
10;4 The Dividend Effect;97
10.1;Dividends as Fundamental Indicators;98
10.2;Dividends in Option Trading Decision—Total Return;104
10.3;The Lumpy Dividend Effect;109
10.4;Additional Dividend Calculations;111
11;5 Return Calculations;116
11.1;Breakeven Rate of Return;117
11.2;Basis for Calculation: Stock Price or Premium at Risk;124
11.3;Return on Investment;126
11.4;The Rate of Return Calculation;128
11.5;Return on Covered Calls Trades;130
11.6;Calculating Covered Call Losses;134
11.7;Calculating Adjusted Basis in Stock for Covered Call Trades;136
11.8;Uncovered Option Returns;136
11.9;Annualizing a Stock’s Return;137
12;6 Strategic Payoff: The Single-Option Trade;141
12.1;The Probability of Option Payoff;142
12.2;Risk and Payoff Calculations: Long Calls and Puts;144
12.2.1;The Long Call;147
12.2.2;The Long Put;150
12.3;Risk and Payoff Calculations: Uncovered Calls;152
12.3.1;ITM Uncovered Calls;153
12.3.2;OTM Uncovered Calls;156
12.4;Risk and Payoff Calculations: Uncovered Puts;158
12.5;Risk and Payoff Calculations: Covered Calls;159
12.6;Risk and Payoff Calculations: Ratio Writes and the Covered Call;166
12.7;Risk and Payoff Calculations: Covered Put;171
12.8;Recalculation of Net Basis in Rolled Short Options;174
13;7 Strategic Payoff: Spreads;177
13.1;Risk and Payoff Calculations: Vertical Bull Spreads;178
13.1.1;Bull Put Credit Spread;179
13.1.2;Bull Call Debit Spread;180
13.1.3;Bear Put Debit Spread;182
13.1.4;Bear Call Credit Spread;184
13.2;Risk and Payoff Calculations: Condors and Butterflies;187
13.2.1;Condor;188
13.2.2;Iron Condor;189
13.2.3;Long Butterfly;191
13.2.4;Short Butterfly;194
13.2.5;Iron Butterfly;196
13.3;Risk and Payoff Calculations: Synthetics;198
13.3.1;Synthetic Long Stock;199
13.3.2;Synthetic Short Stock;201
13.4;Risk and Payoff Calculations: Horizontal Spreads;203
13.4.1;Bull Calendar Spreads;204
13.4.2;Installment Calendar Spreads;207
13.5;Risk and Payoff Calculations: Diagonal Spreads;210
14;8 Strategic Payoff: Straddles;213
14.1;Risk and Payoff Calculations: Straddles;215
14.1.1;Long Straddles;216
14.1.2;Short Straddles;219
14.1.3;Covered Straddles;222
14.2;Risk and Payoff Calculations: Strangles;225
14.2.1;Long Strangles;226
14.2.2;Short Strangles;228
14.2.3;Long Gut Strangle;231
14.2.4;Short Gut Strangle;233
14.3;Risk and Payoff Calculations: Strips and Straps;235
14.3.1;Strip;236
14.3.2;Strap;240
14.4;Strategic Selection of Strikes;243
15;9 Probability and Risk;247
15.1;Abnormal Distribution of Options Trading;248
15.2;Managing Abnormal Probability;251
15.3;Aspects of Probability;253
15.4;Human Nature and Risk;256
15.5;Some Risk Theories;258
15.6;The Role of Variance in Risk Perception;261
15.7;Theory of Probability;263
15.8;Interpreting Probability;266
15.9;Random Variables in Options Trading;267
16;10 Option Pricing Models;271
16.1;The Black-Scholes Pricing Model;273
16.2;Expansion of the Pricing Model;275
16.3;Problems with Black-Scholes Inaccuracy;278
17;11 Alternatives to Pricing Models;284
17.1;Alternatives to Pricing Models—CAPM;286
17.2;Difficulty of Volatility Forecasting;290
17.3;Components of Basic Options Quantification (Chaps. 1–3);294
17.4;Applying the Basics to Manage Trades (Chaps. 4 and 5);295
17.5;Expanding the Basics to Define Profit and Loss Ranges (Chaps. 6–8);295
17.6;Conclusions of Risk and Pricing Models (Chaps. 9 and 10);296
17.7;Conclusion;297
18;Appendix—Formulas;300
19;Bibliography;333
20;Index;339