{"product_id":"positional-option-trading-isbn-9781119583516","title":"Positional Option Trading","description":"\u003cp\u003e\u003cb\u003eA detailed, one-stop guide for experienced options traders\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003ci\u003ePositional Option Trading: An Advanced Guide\u003c\/i\u003e is a rigorous, professional-level guide on sophisticated techniques from professional trader and quantitative analyst Euan Sinclair. The author has over two decades of high-level option trading experience. He has written this book specifically for professional options traders who have outgrown more basic trading techniques and are searching for in-depth information suitable for advanced trading.\u003c\/p\u003e \u003cp\u003eCustom-tailored to respond to the volatile option trading environment, this expert guide stresses the importance of finding a valid edge in situations where risk is usually overwhelmed by uncertainty and unknowability. Using examples of edges such as the volatility premium, term-structure premia and earnings effects, the author shows how to find valid trading ideas and details the decision process for choosing an option structure that best exploits the advantage.\u003c\/p\u003e \u003cp\u003eAdvanced topics include a quantitative approach for directionally trading options, the robustness of the Black Scholes Merton model, trade sizing for option portfolios, robust risk management and more. This book:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eProvides advanced trading techniques for experienced professional traders\u003c\/li\u003e \u003cli\u003eAddresses the need for in-depth, quantitative information that more general, intro-level options trading books do not provide\u003c\/li\u003e \u003cli\u003eHelps readers to master their craft and improve their performance\u003c\/li\u003e \u003cli\u003eIncludes advanced risk management methods in option trading\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eNo matter the market conditions, \u003ci\u003ePositional Option Trading: An Advanced Guide\u003c\/i\u003e is an important resource for any professional or advanced options trader.\u003c\/p\u003e \u003cp\u003e\u003cb\u003eIntroduction xi\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eTrading as a Process xiii\u003c\/p\u003e \u003cp\u003eSummary xv\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 Options: A Summary 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOption Pricing Models 1\u003c\/p\u003e \u003cp\u003eOption Trading Theory 4\u003c\/p\u003e \u003cp\u003eConclusion 10\u003c\/p\u003e \u003cp\u003eSummary 10\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 The Efficient Market Hypothesis and Its Limitations 11\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Efficient Market Hypothesis 11\u003c\/p\u003e \u003cp\u003eAside: Alpha Decay 15\u003c\/p\u003e \u003cp\u003eBehavioral Finance 16\u003c\/p\u003e \u003cp\u003eHigh-Level Approaches: Technical Analysis and Fundamental Analysis 21\u003c\/p\u003e \u003cp\u003eConclusion 27\u003c\/p\u003e \u003cp\u003eSummary 27\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Forecasting Volatility 29\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eModel-Driven Forecasting and Situational Forecasting 30\u003c\/p\u003e \u003cp\u003eThe GARCH Family and Trading 33\u003c\/p\u003e \u003cp\u003eImplied Volatility as a Predictor 36\u003c\/p\u003e \u003cp\u003eEnsemble Predictions 36\u003c\/p\u003e \u003cp\u003eConclusion 38\u003c\/p\u003e \u003cp\u003eSummary 38\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The Variance Premium 39\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAside: The Implied Variance Premium 40\u003c\/p\u003e \u003cp\u003eVariance Premium in Equity Indices 42\u003c\/p\u003e \u003cp\u003eThe Implied Skewness Premium 46\u003c\/p\u003e \u003cp\u003eThe Implied Correlation Premium 47\u003c\/p\u003e \u003cp\u003eCommodities 47\u003c\/p\u003e \u003cp\u003eBonds 49\u003c\/p\u003e \u003cp\u003eThe VIX 50\u003c\/p\u003e \u003cp\u003eCurrencies 50\u003c\/p\u003e \u003cp\u003eEquities 50\u003c\/p\u003e \u003cp\u003eReasons for the Variance Premium 51\u003c\/p\u003e \u003cp\u003eInsurance 52\u003c\/p\u003e \u003cp\u003eJump Risk 52\u003c\/p\u003e \u003cp\u003eTrading Restrictions 52\u003c\/p\u003e \u003cp\u003eMarket-Maker Inventory Risk 52\u003c\/p\u003e \u003cp\u003ePath Dependency of Returns 53\u003c\/p\u003e \u003cp\u003eThe Problem of the Peso Problem 55\u003c\/p\u003e \u003cp\u003eConclusion 56\u003c\/p\u003e \u003cp\u003eSummary 56\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Finding Trades with Positive Expected Value 57\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAside: Crowding 57\u003c\/p\u003e \u003cp\u003eTrading Strategies 61\u003c\/p\u003e \u003cp\u003eOptions and Fundamental Factors 63\u003c\/p\u003e \u003cp\u003ePost-Earnings Announcement Drift (PEAD) 68\u003c\/p\u003e \u003cp\u003eConfidence Level Two 71\u003c\/p\u003e \u003cp\u003eThe Overnight Effect 75\u003c\/p\u003e \u003cp\u003eFOMC and Volatility 75\u003c\/p\u003e \u003cp\u003eThe Weekend Effect 77\u003c\/p\u003e \u003cp\u003eVolatility of Volatility Risk Premia 78\u003c\/p\u003e \u003cp\u003eConfidence Level One 80\u003c\/p\u003e \u003cp\u003eEarnings-Induced Reversals 80\u003c\/p\u003e \u003cp\u003ePre-Earnings Announcement Drift 81\u003c\/p\u003e \u003cp\u003eConclusion 82\u003c\/p\u003e \u003cp\u003eSummary 83\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Volatility Positions 85\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAside: Adjustment and Position ‘‘Repair’’ 86\u003c\/p\u003e \u003cp\u003eStraddles and Strangles 86\u003c\/p\u003e \u003cp\u003eAside: Delta-Hedged Positions 93\u003c\/p\u003e \u003cp\u003eButterflies and Condors 95\u003c\/p\u003e \u003cp\u003eAside: Broken Wing Butterflies and Condors 99\u003c\/p\u003e \u003cp\u003eCalendar Spread 100\u003c\/p\u003e \u003cp\u003eIncluding Implied Volatility Skew 102\u003c\/p\u003e \u003cp\u003eStrike Choice 104\u003c\/p\u003e \u003cp\u003eChoosing a Hedging Strike 107\u003c\/p\u003e \u003cp\u003eExpiration Choice 109\u003c\/p\u003e \u003cp\u003eConclusion 111\u003c\/p\u003e \u003cp\u003eSummary 111\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Directional Option Trading 113\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSubjective Option Pricing 113\u003c\/p\u003e \u003cp\u003eA Theory of Subjective Option Pricing 115\u003c\/p\u003e \u003cp\u003eDistribution of Option Returns: Summary Statistics 118\u003c\/p\u003e \u003cp\u003eStrike Choice 120\u003c\/p\u003e \u003cp\u003eFundamental Considerations 124\u003c\/p\u003e \u003cp\u003eConclusion 124\u003c\/p\u003e \u003cp\u003eSummary 125\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 Directional Option Strategy Selection 127\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eLong Stock 128\u003c\/p\u003e \u003cp\u003eLong Call 129\u003c\/p\u003e \u003cp\u003eLong Call Spread 130\u003c\/p\u003e \u003cp\u003eShort Put 131\u003c\/p\u003e \u003cp\u003eCovered Calls 131\u003c\/p\u003e \u003cp\u003eComponents of Covered Call Profits 134\u003c\/p\u003e \u003cp\u003eCovered Calls and Fundamentals 136\u003c\/p\u003e \u003cp\u003eShort Put Spread 137\u003c\/p\u003e \u003cp\u003eRisk Reversal 138\u003c\/p\u003e \u003cp\u003eAside: The Risk Reversal as a Skew Trade 141\u003c\/p\u003e \u003cp\u003eRatio Spreads 142\u003c\/p\u003e \u003cp\u003eConclusion 145\u003c\/p\u003e \u003cp\u003eSummary 145\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Trade Sizing 147\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Kelly Criterion 147\u003c\/p\u003e \u003cp\u003eNon-normal Discrete Outcomes 149\u003c\/p\u003e \u003cp\u003eNon-normal Continuous Outcomes 151\u003c\/p\u003e \u003cp\u003eUncertain Parameters 154\u003c\/p\u003e \u003cp\u003eKelly and Drawdown Control 158\u003c\/p\u003e \u003cp\u003eThe Effect of Stops 161\u003c\/p\u003e \u003cp\u003eConclusion 170\u003c\/p\u003e \u003cp\u003eSummary 170\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 Meta Risks 171\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCurrency Risk 171\u003c\/p\u003e \u003cp\u003eTheft and Fraud 173\u003c\/p\u003e \u003cp\u003eExample One: Baring’s Bank 174\u003c\/p\u003e \u003cp\u003eExample Two: Yasumo Hamanaka, aka ‘‘Mr. Copper’’ 175\u003c\/p\u003e \u003cp\u003eExample Three: Bernie Madoff 176\u003c\/p\u003e \u003cp\u003eIndex Restructuring 177\u003c\/p\u003e \u003cp\u003eArbitrage Counterparty Risk 178\u003c\/p\u003e \u003cp\u003eConclusion 179\u003c\/p\u003e \u003cp\u003eSummary 179\u003c\/p\u003e \u003cp\u003eConclusion 181\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix 1 Traders’ Adjustments to the BSM Assumptions 183\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Existence of a Single, Constant Interest Rate 183\u003c\/p\u003e \u003cp\u003eThe Stock Pays No Dividends 186\u003c\/p\u003e \u003cp\u003eAbsence of Taxes 186\u003c\/p\u003e \u003cp\u003eThe Ability to Trade and Short the Underlying 187\u003c\/p\u003e \u003cp\u003eNonconstant Volatility 190\u003c\/p\u003e \u003cp\u003eConclusion 192\u003c\/p\u003e \u003cp\u003eSummary 193\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix 2 Statistical Rules of Thumb 195\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eConverting Range Estimates to Option Pricing Inputs 195\u003c\/p\u003e \u003cp\u003eRule of Five 196\u003c\/p\u003e \u003cp\u003eRule of Three 197\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix 3 Execution 199\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eExample 204\u003c\/p\u003e \u003cp\u003eReferences 207\u003c\/p\u003e \u003cp\u003eIndex 219\u003c\/p\u003e \u003cp\u003e\u003cb\u003eEuan Sinclair, PhD,\u003c\/b\u003e is an options trader and financial engineer at Hull Tactical. He holds a doctorate in theoretical physics from the University of Bristol.\u003c\/p\u003e  \u003cp\u003eCreated for experienced traders who desire the significant benefits of including options in their trading strategies and portfolios, \u003ci\u003ePositional Option Trading: An Advanced Guide\u003c\/i\u003e shows readers how to find a trading situation with an edge, structure a trade, and control the risk.\u003c\/p\u003e \u003cp\u003eWritten in three parts, the first section of \u003ci\u003ePositional Option Trading\u003c\/i\u003e discusses the efficient market hypothesis and how, even if we accept it as true, it leaves plenty of room for the discovery of profitable trading strategies. These opportunities can be categorized as inefficiencies or risk premia, each of which should be traded differently. The author also discusses behavioral psychology and its ability to inform our strategies. Technical and fundamental analysis are explored as ways of finding trading edges. \u003c\/p\u003e\u003cp\u003eForecasting, as well as the overpricing of implied volatility are examined in the next chapters, while the section closes with a description of eleven specific phenomena that can be profitably traded. \u003c\/p\u003e\u003cp\u003eThe second part of the book discusses the distributional properties of some option structures used to monetize the trading edges revealed by the previously discussed techniques. Volatility trading structures and directional option trades are examined next. \u003c\/p\u003e\u003cp\u003eFinally, the third part of Positional Option Trading discusses the concept of risk generally. The book closes with a description of specific topics like trade sizing and the idea of unknowable risks, using historical examples as a guide. \u003c\/p\u003e\u003cp\u003ePerfect for moderately to highly experienced traders who hope to use option trading to reduce risk and increase returns in their trading strategies, \u003ci\u003ePositional Option Trading\u003c\/i\u003e belongs on the bookshelves of professional traders and money managers as well as those who wish to maximize the efficiency of their own portfolios.  \u003c\/p\u003e\u003cp\u003e\u003cb\u003ePraise for \u003ci\u003ePOSITIONAL OPTION TRADING\u003c\/i\u003e\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Euan Sinclair's book provides an investor with a systematic quantitative approach for using options to enhance returns. Sinclair has worked for over 25 years in the options industry with two of the most successful market making firms. Drawing from his vast experience he exposes tricks of the trade that were previously only available to professionals or exchange members.\"\u003cbr\u003e\u003cb\u003e—Blair Hull,\u003c\/b\u003e Founder and Chairman, Hull Tactical Asset Allocation\u003c\/p\u003e \u003cp\u003e\"This book is another excellent example of Sinclair's in-depth understanding of derivatives markets. Chapter 10 alone is worth the price of the book; it deftly explains the real-world pitfalls that one usually learns about only after suffering losses. With astute analysis, Sinclair guides his readers through the complex world of derivatives markets.\"\u003cbr\u003e\u003cb\u003e—Arthur Duquette,\u003c\/b\u003e Partner, Bluefin Trading\u003c\/p\u003e \u003cp\u003e\"Volatility trading is asymmetrically difficult either on the short side or on the long side. In recent years we have seen both long and short volatility shops going out of business ... Euan Sinclair manages to relay a strong message that the difference lies in finding trades with positive expected value, not with the sign of your trades. He proposes to analyze the term structure, fundamental factors, and earnings for edges. He suggests evaluating the skewness and trade sizing to monetize the edges. This book is a must-read full of knowledge for anyone working with and learning about options markets!\"\u003cbr\u003e\u003cb\u003e—Artur Sepp,\u003c\/b\u003e Director of Research, Quantica Capital AG\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989817376997,"sku":"NP9781119583516","price":79.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781119583516.jpg?v=1761785569","url":"https:\/\/k12savings.com\/es\/products\/positional-option-trading-isbn-9781119583516","provider":"K12savings","version":"1.0","type":"link"}