Trading Options in Turbulent Markets: Master Uncertainty through Active Volatility Management

Introduction

In may of 2008 you were on your way to the Bahamas in a chartered Learjet with your old gang of college friends. Years ago your wife nicknamed the six of you the Musketeers. Whenever possible, the Musketeers loved to escape together. The plan this time was to spend two days diving and snorkeling, and your wife and son were to meet you in Nassau on Sunday night. But the last thing you remember is a dull throb of panic as you stared out the window at the fire on the left engine. The pilot turned the aircraft around and frantically dumped fuel in an attempt to stay aloft. You listened to his voice over the intercom, failing to stay calm as he announced that he had asked air traffic control in Miami for clearance for an emergency landing.

Then you were lying on your back in a brightly lighted room. Your wife and son were there, and some people in white coats. Your wife and son seemed surprised, even delighted. Strange. You were about to die; what were they so giddy about?

A few days later, you were sitting up in your hospital bed, eating and talking. The doctor said you would need six months or so of therapy and exercise to fully recover, but you should be able to return to work and resume a normal life. The aircraft had gone down in shallow coastal waters, and the pilot had been killed. The copilot and the passengers, including your friends, managed to escape the wreckage with varying levels of injury. Of the Musketeers, you took the worst hit, lingering in a coma for over ...