Book description
Praise forTrading Options inTurbulent Markets
"Of the five basic variables that drive option pricing models, the volatility assumption is far and away the most impactful. Mr. Shover's definitive work, exploring all aspects of the world of volatility, truly is a gift to the investing public."
—William Floersch, President and CEO, Fortis Clearing Americas, LLC
"There are a myriad of 'Options 101' books for the beginning options investor and painfully lengthy and dry graduatelevel books on advanced strategies. Larry has found the sweet spot in between, offering a great book on intermediate option strategies. I can heartily endorse Trading Options in Turbulent Markets as THE book for investors seeking to enhance their knowledge of derivative trading and createa lowrisk, highreturn investment game plan."
—Jon "Doctor J" Najarian, cofounder, tradeMONSTER.com
"Mr. Shover has managed to marry a thoughtful presentation of volatility as it relates to options pricing and options trading, with a narrative that goes beyond the purely theoretical and focuses on the practical implications of this 'measure of instability' (first line of Chapter 2) for those who use options. In light of the tumultuous events that have churned the global financial markets, a read on the practical implications of volatility seems prudent for all who choose to employ options."
—Pat Arbor, Chairman Emeritus, CBOT, and current Director ofFirst Chicago Bank and Trust
"Shover's book offers valuable insights from his reallife experience in trading volatile markets."
—Jim Bittman, Senior Instructor, The Options Institute at CBOE, and author of Trading Options as a Professional
"Larry Shover was a successful options trader in his years at CRT and a valuablemember of our team. His book is both accessible and informative, and its pages are filled with insights gained from many years of experience. Larry writes with passion and acumen, making this a book that will do more than just sit on your shelf."
—Joseph Ritchie, founder, Chicago Research and Trading Group (CRT); founder and Chairman, Fox River Financial Resources, Inc.; andCEO, Rwanda Development Board
Table of contents
 Copyright
 Acknowledgments
 Introduction

1. Understanding the Relationship between Market Turbulence and Option Volatility
 1. Managing Risk and Uncertainty with Options

2. Making Sense of Volatility in Options Trading
 2.1. Volatility as an Asset Class
 2.2. Analyzing Volatility with Implied Volatility
 2.3. What Does Implied Volatility Reveal?
 2.4. Making Trading Decisions Based on the Disparity between Historical and Implied Volatility
 2.5. Appreciating Volatility for All It Is Worth
 2.6. How Volatility Really Works on the Trading Floor
 2.7. Volatility and Uncertainty: Lessons for the Irrational Option Trader
 2.8. Varieties of Option Volatility Trading
 3. Working with Volatility to Make Investment Decisions
 4. Volatility Skew: Smile or Smirk?

2. Understanding Option Volatility and its Relationship to Option Greeks, Personal Decision Making, and Odds Creation
 5. Extreme Volatility and Option Delta

6. Smoke and Mirrors: Managing Gamma through Volatile Markets
 6.1. Gamma and Volatility
 6.2. Managing Positive Gamma during a HighVolatility Environment
 6.3. The Bad News: There's Always More than Meets the Eye
 6.4. Practical Considerations for Managing Long Gamma in a HighVolatility Environment
 6.5. Managing Negative Gamma in a HighVolatility Environment
 6.6. Practical Considerations of Negative Gamma in High Volatility
 6.7. Gamma and Volatility with Respect to Time Structure
 6.8. Summary

7. Price Explosion: Volatility and Option Vega
 7.1. The Relationship between Implied Volatility and Vega
 7.2. Implied Volatility: Price Analogy
 7.3. Option Vega and Time
 7.4. Option Vega and Its Greek Cousins
 7.5. Option Vega Implications
 7.6. Don't Underestimate the Relationship between Volatility and Option Vega
 7.7. Volatility and Vega Insensitivity
 7.8. Important Concepts When Applying Option Vega in a Volatile Marketplace
 7.9. Summary

8. Sand in the Hourglass: Volatility and Option Theta

8.1. Balancing Time Decay with Volatility: Mistakes Traders Make
 8.1.1. Mistake #1: When Traders Don't Fully Understand the Effect of Time Decay
 8.1.2. Mistake #2: When Traders Underestimate or Misinterpret Volatility and Its Effect on Theta
 8.1.3. Buying Options (Negative Theta) in a HighVolatility Environment
 8.1.4. If You Happen to Be in the Fortunate Position of Owning Options during an Upward Movement in Volatility, This Is What You Should Expect to Happen
 8.1.5. If You Happen to Be in the Unfortunate Position of Being Short Options during an Upward Movement in Volatility, This Is What You Should Expect to Happen
 8.2. Volatility and Theta: What Every Investor Needs to Know

8.1. Balancing Time Decay with Volatility: Mistakes Traders Make

3. Ten Proven Strategies to Employ in Uncertain Times
 9. Preparing for Trading Using Volatility Strategies

10. The BuyWrite, or the Covered Call
 10.1. The BuyWrite (Covered Call) Defined
 10.2. An Example of the Covered Call Strategy
 10.3. The Theory and Reality of the Covered Call
 10.4. Covered Call Writing and Implied Volatility
 10.5. Implied Volatility in Practice
 10.6. Managing Contracts in a Time of High Volatility or a Falling Market
 10.7. Effective Call Writing in a Volatile Market
 11. Covering the Naked Put

12. The Married Put: Protecting Your Profit
 12.1. Volatility, Downside Risk, and the Case for Portfolio Insurance
 12.2. Why Buy High Volatility?
 12.3. The Married Put
 12.4. How and When to Use a Married Put
 12.5. Example of When to Use a Married Put
 12.6. The Married Put: Limiting Loss, Neutralizing Volatility, and Unleashing Upside Potential
 12.7. Married Put: A RealLife Illustration
 13. The Collar: Sleep at Night

14. The Straddle and Strangle: The Risks and Rewards of VolatilitySensitive Strategies
 14.1. The Buying or Selling of Premium
 14.2. Properties of Straddles and Strangles
 14.3. Comparing Straddles and Strangles
 14.4. How to Compare Historical and Implied Volatility
 14.5. The Impact of Correlation and Implied Volatility Skew
 14.6. An Alternative to the Naked Volatility Sale via the Straddle/Strangle: The Strangle Swap

15. The Vertical Spread and Volatility
 15.1. Introduction to the Vertical Spread
 15.2. A Trader's Reasoning for Trading a Vertical Spread
 15.3. Designing Your Vertical Spread
 15.4. Vertical Spreads and Greek Exposure
 15.5. Vertical Spreads as a Pure Volatility Play
 15.6. Comparing Volatility's Effect on Vertical Spreads
 15.7. Summary: Comparing Vertical Spreads and Implied Volatility

16. Calendar Spreads: Trading Theta and Vega
 16.1. Calendar Spreading—Trading Time
 16.2. Risks and Rewards of the Calendar Spread
 16.3. A Calendar Spread with a Bullish Expectation

16.4. Considerations and Observations for Calendar Spreads and Volatility
 16.4.1. 1. Time Value and Volatility in Calendar Spreads Are not Necessarily Connected
 16.4.2. 2. Implied Volatility Affects Calendar Spreads Mostly with AttheMoney Options
 16.4.3. 3. Avoid Assuming Too Much about FrontMonth versus BackMonth Vega
 16.4.4. 4. At Extreme Prices for an Underlying Stock, Differences in Parity Appear
 16.4.5. 5. Pay Attention to LongTerm Trends in Volatility
 16.4.6. 6. Don't Put Too Much Emphasis on Greek Values
 17. Ratio Spreading: Trading Objectives Tailor Made
 18. The Butterfly Spread
 19. The Iron Butterfly and the Condor
Product information
 Title: Trading Options in Turbulent Markets: Master Uncertainty through Active Volatility Management
 Author(s):
 Release date: August 2010
 Publisher(s): Wiley
 ISBN: 9781576603604
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