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Options Math for Traders: How To Pick the Best Option Strategies for Your Market Outlook, + Website

ISBN: 978-1-118-16437-2
272 pages
October 2012
Options Math for Traders: How To Pick the Best Option Strategies for Your Market Outlook, + Website (1118164377) cover image
A practical guide to the math behind options and how that knowledge can improve your trading performance

No book on options can guarantee success, but if a trader understands and utilizes option math effectively, good things are going to happen. The idea behind Options Math for Traders + Website is to help retail option traders understand some of the basic tenants and enduring relationships of options, and option math, that professional and institutional traders rely on every day. This book skillfully highlights those strategies that are inherently superior from an option math point of view and explains what drives that superiority while also examining why some strategies are inherently inferior.

The material is explained without complex equations or technical jargon. The goal is to give you a solid conceptual foundation of options behavior so you can make more informed decisions when choosing an option strategy for your market outlook. Topics covered include the volatility premium, because over time, options will cost more than they are ultimately worth; skew, wherein far out of the money put options may seem cheap from an absolute term, but are very expensive in relative terms; and the acceleration in option price erosion. The book also has a companion Website, which includes links to those sites that can scan for the best strategies discussed in the book.

  • Explains, in a non-technical manner, the mathematical properties of options so that traders can better select the right options strategy for their market outlook
  • Companion Website contains timely tools that allow you to continue to learn in a hands-on fashion long after closing the book
  • Written by top options expert Scott Nations

Most independent traders have an imperfect understanding of the math behind options pricing. With Options Math for Traders + Website as your guide, you'll gain valuable lessons in this area and discover how this information can improve your trading performance.

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Preface ix

Acknowledgments xvii

PART ONE The Basics

CHAPTER 1 The Basics 3

CHAPTER 2 Direction, Magnitude, and Time 17

CHAPTER 3 Volatility 25

CHAPTER 4 Option Pricing Models and Implied Volatility 37

PART TWO The Phenomena

CHAPTER 5 The Volatility Risk Premium 51

CHAPTER 6 Implied Volatility and Skew 63

CHAPTER 7 Time Value and Decay 77

CHAPTER 8 The Bid/Ask Spread 87

CHAPTER 9 Volatility Slope 105

PART THREE The Trades

CHAPTER 10 Covered Calls 115

CHAPTER 11 Selling Puts 151

CHAPTER 12 Calendar Spreads 171

CHAPTER 13 Risk Reversal 197

CHAPTER 14 Vertical Spreads 217

Appendix 235

Index 243

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SCOTT NATIONS is President and CIO of NationsShares, a division of Fortress Trading, Inc. Previously, he was head trader for Sovereign Capital, a proprietary trading firm, and a floor trader at both the Chicago Board of Trade and the Chicago Mercantile Exchange. Nations is also a financial engineer, creating, testing, patenting, and licensing a number of sophisticated option-based and option-enhanced products including the Nations Enhanced Covered Call Index; the Nations Enhanced Collar Index; the Nations Option Levered Index; and the Nations VolDex. He appears on CNBC several times each week and serves as one of the regular panelists on CNBC's weekly Options Action show.

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"Options Math for Traders + Website: How to Pick the Best Option Strategies for Your Market Outlook by Scott Nations is an excellent educational tool for the investor wishing to utilize options in their investment strategies.  Options Math for Traders guides you and helps you understand the thought process when evaluating and analyzing risk and reward on an options trade". —Dax Rodriguez, President, Livevol, Inc.
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January 03, 2013
Options Math for Traders: How To Pick the Best Option Strategies for Your Market Outlook, + Website

No book on options can guarantee success, but if a trader understands and utilizes option math effectively, good things are going to happen. The idea behind Options Math for Traders + Website is to help retail option traders understand some of the basic tenants and enduring relationships of options, and option math, that professional and institutional traders rely on every day. This book skillfully highlights those strategies that are inherently superior from an option math point of view and explains what drives that superiority while also examining why some strategies are inherently inferior.

The material is explained without complex equations or technical jargon. The goal is to give you a solid conceptual foundation of options behavior so you can make more informed decisions when choosing an option strategy for your market outlook. Topics covered include the volatility premium, because over time, options will cost more than they are ultimately worth; skew, wherein far out of the money put options may seem cheap from an absolute term, but are very expensive in relative terms; and the acceleration in option price erosion. The book also has a companion Website, which includes links to those sites that can scan for the best strategies discussed in the book.

  • Explains, in a non-technical manner, the mathematical properties of options so that traders can better select the right options strategy for their market outlook
  • Companion Website contains timely tools that allow you to continue to learn in a hands-on fashion long after closing the book
  • Written by top options expert Scott Nations

Most independent traders have an imperfect understanding of the math behind options pricing. With Options Math for Traders + Website as your guide, you'll gain valuable lessons in this area and discover how this information can improve your trading performance.

See More
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Options Math for Traders: How To Pick the Best Option Strategies for Your Market Outlook, + Website (US $80.00)

-and- The Risk of Trading: Mastering the Most Important Element in Financial Speculation (US $75.00)

Total List Price: US $155.00
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