318 Index
trading options (continued)
durational outlook 190, 243
options vs basis points 190–1
selling an option 188–9
terms to use 71–2
trading delta and time decay 187
trading volatility trends 189
volatility skews 206, 211–15
underlying asset 7, 25, 243, 309
vega 47, 110, 189, 309
calendar spread 159, 305
definition and examples 63–5
delta versus 169–70
implied volatility changes 173–4
implied volatility trends 65–6
implied volatility vs 170–3
long 1×2 spreads 91
long straddle 112
long strangle 118
positive and negative 65
price ratio 179–81
risk/return of 66
short strangle 118
time and 165–9
vertical spreads 73, 309
VIX 185
volatile market spreads, list of 70
volatility and pricing models 34, 37–9
bell curve 37–9, 44–5
comparing historical and implied
volatility 43
conventional usage 43
historical volatility of underlying
39–41, 43
implied volatility 41–3, 170–4, 175
numa.com 42
volatility skews 42, 49, 83, 196, 199,
309
1×1s and 83, 206
at-the-money implied volatility vs
206
bonds 199–201, 207, 210–11
call skew 83, 201, 207, 210–11
change of degree 210
commodities 83, 204–6, 207, 214
expiration, behaviour towards
208–9
interest rate contracts, long-term
207
market sentiment 214–15
put skew 197, 201, 207, 210, 214
reasons for 206–7
stock indexes 202–3, 207, 210, 214
stocks 204
trading 206, 211
trading options on linear skew
213–14
trading options on positive skew
211–13
underlying, shift with 209–10
vertical shift 210–11
volatility spreads 44, 69, 309
definitions of volatile and stationary
110
gamma 57–8, 110, 112, 307
long straddle 57, 110–13
long strangle 116–18
market volatility 109–10
short straddle 57, 114–16
short strangle 118–19
theta 110, 118, 308
vega 110, 112, 118, 309
volatility trends
seasonal 160
trading 189
weekly or monthly results 190–1
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