Chapter 8The Science of Volatility
I always try to keep things simple and explain things with pictures where possible. The aim of this chapter is to explain more about the mechanisms behind option pricing and how they might affect you as a trader. Frankly it would take an entire book to explain all the different methodologies, which are evolving all the time, but we certainly cover the essentials here.
The overall goal is to improve your trading performance, not make you a math egghead.
Options play a significant role in the financial markets, particularly during times of instability and increased market volatility. This is because they can be used by investors to hedge their positions in a highly leveraged fashion. Hedging risk is another way ...