Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profit (Bloomberg Financial) - Hardcover

Passarelli, Dan

Hardcover

ISBN 10: 157660246X ISBN 13: 9781576602461

Publisher: Bloomberg Press, 2008

Synopsis

Veteran options trader Dan Passarelli explains a new methodology for option trading and valuation. With an introduction to option basics as well as chapters on all types of spreads, put-call parity and synthetic options, trading volatility and studying volatility charts, and advanced option trading, Trading Option Greeks holds pertinent new information on how more accurate pricing can drive profit.

Most options traders focus on strategies such as covered calls, vertical spreads, butterflies and condors, and so on. But traders often don't know how to use the "greeks"—the five factors that influence an option's price—to trade more effectively.

The "greeks" (Delta, Gamma, Theta, Vega, Rho) are tools to measure minute changes in an option's price based on corresponding changes in:

• Interest rates
• Time to expiration
• Price changes in the underlying security
• Volatility
• Dividends

Using the greeks can lead to more accurate pricing information that will alert an option trader to mispriced derivatives that can be exploited for profit. In straightforward language and making use of charts and examples, Passarelli explains how to use the greeks to be a better options trader.

About this title

About the Author

Dan Passarelli began his career as a floor trader at the Chicago Board Options Exchange (CBOE), trading equity options and later agricultural options and futures on the floor of the Chicago Board of Trade (CBOT). He currently provides options education to retail and institutional traders at a premier brokerage firm. Passarelli was an instructor at the Options Institute, which is the educational arm of the CBOE. He also worked with the Options Industry Council (OIC), educating retail traders via podcasts, webcasts, live seminars, and has written numerous published articles.

From the Inside Flap

Veteran options trader Dan Pasarelli explains a methodology for option trading and valuation in this timely volume on option greeks. With an introduction to option basics as well as chapters on spreads, put-call parity and synthetic options, trading volatility, and advanced option trading, Trading Option Greeks holds new pertinent information on how the greeks can drive profit.

The greeks (delta, gamma, theta, vega, rho,) are tools to measure changes in an option's value based on corresponding changes in:

--Volatility
--Time to expiration
--Underlying price
--Interest rates

Using these tools can lead to more accurate pricing and trading and alert the option trader to a range of opportunities.

Edition details

• Publisher: Bloomberg Press
• Publication date: 2008
• Language: English
• ISBN 10: 157660246X
• ISBN 13: 9781576602461
• Binding: Hardcover
• Edition number: 1
• Number of pages: 352