Option Strategy Risk / Return Ratios: A Revolutionary New Approach to Optimizing, Adjusting, and Trading Any Option Income Strategy - Softcover

Johnson, Brian

Softcover

ISBN 10: 0692028293 ISBN 13: 9780692028292

Publisher: Trading Insights, LLC, 2014

Synopsis

Written by Brian Johnson, a professional investment manager with many years of trading and teaching experience, Option Strategy Risk/Return Ratios introduces a revolutionary new framework for evaluating, comparing, adjusting, and optimizing option income strategies. Drawing on his extensive background in option-pricing and on decades of experience in investment management and trading, Brian Johnson developed these tools specifically to manage option income strategies. Unlike crude rules-of-thumb, these revolutionary new tools can be applied to any option income strategy, on any underlying security, in any market environment. Risk and return are timeless concepts in finance and trading, but this is the first time both concepts have been integrated successfully into a consistent approach for managing option income strategies. Option Strategy Risk/Return Ratios is written in a clear, easy-to-understand fashion and explains how to apply risk/return ratios to condors, butterflies, calendars, double diagonals, and even hybrid income strategies. Created especially for investors who have some familiarity with options, this practical guide begins with an examination of option income strategies and is followed by a review of the option Greeks, the building blocks of option risk management. Next, a critique of common adjustment triggers lays the foundation for a detailed explanation of these exciting new tools: option strategy risk/return ratios. Each option income strategy is explained, evaluated, and ranked using these new tools with complete descriptions and graphical examples. The book includes over sixty separate graphs and tables to illustrate how risk/return ratios behave using specific strategy examples in actual market conditions. The risk/return ratios are then used to introduce a new hybrid strategy that combines the best characteristics of the other income strategies. Finally, the last chapter examines practical considerations and prospective applications of these innovative new tools. Not only are the formulas provided for every calculation, but each risk/return ratio is explained intuitively and depicted graphically. For traders who are not mathematically inclined, Option Strategy Risk/Return Ratios also includes a link to an Excel spreadsheet with macros designed to calculate all of the risk/return ratios introduced in the book. About the Author: Brian Johnson designed, programmed, and implemented the first return sensitivity based parametric framework actively used to control risk in fixed income portfolios. He further extended the capabilities of this approach by designing and programming an integrated series of option valuation, prepayment, and optimization models. Based on this technology, Mr. Johnson founded Lincoln Capital Management’s fixed income index business, where he ultimately managed over $13 billion in assets for some of the largest and most sophisticated institutional clients in the U.S. and around the globe. He later served as the President of a financial consulting and software development firm, designing artificial intelligence-based forecasting and risk management systems for institutional investment managers. Mr. Johnson is now a full-time proprietary trader in options, futures, stocks, and ETFs primarily using algorithmic trading strategies. In addition to his professional investment experience, he also designed and taught courses in financial derivatives for both MBA and undergraduate business programs. He has written articles for the Financial Analysts Journal, Active Trader, and Seeking Alpha and he regularly shares his trading insights and research ideas as the editor of www.TraderEdge.Net. Mr. Johnson holds a B.S. degree in finance with high honors from the University of Illinois at Urbana-Champaign and an MBA degree with a specialization in Finance from the University of Chicago Booth School of Business.

About this title

About the Author

Brian Johnson designed, programmed, and implemented the first returnsensitivity based parametric framework actively used to control risk infixed income portfolios. He further extended the capabilities of thisapproach by designing and programming an integrated series of optionvaluation, prepayment, and optimization models.

Based on this technology, Mr. Johnson founded Lincoln CapitalManagement's fixed income index business, where he ultimately managedover $13 billion in assets for some of the largest and mostsophisticated institutional clients in the U.S. and around the globe.

He later served as the President of a financial consulting and softwaredevelopment firm, designing artificial intelligence-based forecastingand risk management systems for institutional investment managers.

Mr. Johnson is now a full-time proprietary trader in options,futures, stocks, and ETFs primarily using algorithmic tradingstrategies. In addition to his professional investment experience, healso designed and taught courses in financial derivatives for both MBAand undergraduate business programs.

He is the author of two groundbreaking books on options: 1) Option Strategy Risk / Return Ratios, and 2) Exploiting Earnings Volatility.His recent in-depth (100+ page) article, Option Income Strategy Trade Filters, represents the culmination of years of research into developing asystematic framework for optimizing the timing of Option Income Strategy (OIS) trades.

He has also written articles for the Financial Analysts Journal, Active Trader, and Seeking Alpha and he regularly shares his trading insights and research ideas as the editor of traderedge.net/.

Mr. Johnson holds a B.S. degree in finance with high honors from the University of Illinois at Urbana-Champaign and an MBA degree with a specialization in Finance from the University of Chicago Booth Schoolof Business.

Edition details

• Publisher: Trading Insights, LLC
• Publication date: 2014
• Language: English
• ISBN 10: 0692028293
• ISBN 13: 9780692028292
• Binding: Paperback
• Number of pages: 206