PDF 31页

TABLE OF CONTENTS
INDEX OF FIGURES 4
INDEX OF TABLES 4
INDEX OF EQUATIONS 4
OPTION BASICS 5
CALLS & PUTS 5
DEFINITION 6
THE VALUE OF AN OPTION 6
WHY OPTIONS? DIFFERENCES AND TRADEOFFS 7
NO ARBITRAGE RULES 9
SYNTHETIC FORWARD 9
RISK FREE POSITION 9
OPTION PRICING 11
INPUTS 11
OPTION RISK 12
DELTA (D ) 12
GAMMA ( G ) 14
TIME DECAY (Q ) 15
INTEREST RATE RISK (RHO, PHI) 17
VOLATILITY 18
CONCEPT 18
EXPLANATION AND MEASURES OF VOLATILITY 18
VOLATILITY AND TIME 19

HISTORICAL VOLATILITY 19
IMPLIED VOLATILITY 19
HISTORY OF IMPLIED VOLATILITY 20
SOME FUN AND GAMES WITH OVERNIGHT ATMF OPTIONS. 21
BASIC OBSERVATIONS 21
BASIC PROPERTIES 21
VOLATILITY RISK OR KAPPA (k)(A.K.A. VEGA) 22
TRADING OPTIONS 23
INTERPRETING DELTA 23
CONVERTING PREMIUMS 24
PRICING “LIVE” 25
PRICING FOR A “VOL” QUOTE 25
GENERAL 25
OTHER PRACTICAL ASPECTS OF TRADING 26
INTERBANK MARKET CONVENTIONS 26
ELEMENTARY STRATEGIES 27
CALL-SPREAD / PUT-SPREAD 27
RISK-REVERSAL 28
VOLATILITY TRADING EXERCISE 29
KEY TERMS 30
PUT / CALL 30
PRICE 30
DELTA 30
GAMMA 30
KAPPA 30
DISCLAIMER 31