January 2008
Intermediate to advanced
304 pages
7h 12m
English
book
The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets
by Jeff Augen
Content preview from The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets
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8. Trading the Expiration Cycle
In the preceding chapter, we explored trading opportunities that arise from earnings-related price distortions. Our analysis focused on implied volatility swings—the run-up that precedes most earnings announcements, and the collapse that follows. The dynamics are relatively complex because they depend on historical price change behavior, prevailing market conditions, and the stock's recent behavior.
This chapter focuses on a different set of price distortions that are rooted in the options expiration cycle. Most of these effects are a direct result of the interplay between the dynamics of trading and the mathematics of option pricing. For example, the amount of time that the market is closed each evening becomes ...
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