Summary of Brian Overby's The Options Playbook , livre ebook

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33 pages

English

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Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 Options trading is a way for savvy investors to leverage assets and control some of the risks associated with playing the market. Options can be complicated and risky, however, and not all strategies may expose you to theoretically unlimited losses.
#2 For rookies, I've created a brief overview of how options work and outlined some strategies to get you started. These techniques will help you get used to the option market without leaving your rear end exposed to risk.
#3 The Option Playbook is a resource for more experienced option traders. It contains the construction and risk profiles for many different strategies, so you can stay focused on forecasting or analyzing The Greeks instead of having to remember how to calculate your break-even points.

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Trading Strategies

Securities

Investments

Economie gestion

Economics

Analysis

Business

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Publié par	Everest Media LLC
Date de parution	16 mai 2022
Nombre de lectures	0
EAN13	9798822510937
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0100€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

Insights on Brian Overby's The Options Playbook
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4 Insights from Chapter 5
Insights from Chapter 1

#1

Options trading is a way for savvy investors to leverage assets and control some of the risks associated with playing the market. Options can be complicated and risky, however, and not all strategies may expose you to theoretically unlimited losses.

#2

For rookies, I've created a brief overview of how options work and outlined some strategies to get you started. These techniques will help you get used to the option market without leaving your rear end exposed to risk.

#3

The Option Playbook is a resource for more experienced option traders. It contains the construction and risk profiles for many different strategies, so you can stay focused on forecasting or analyzing The Greeks instead of having to remember how to calculate your break-even points.
Insights from Chapter 2

#1

The terms long, short, and strike price are used when discussing options and stocks. When you’re talking about options and stocks, long implies a position of ownership. When you sell an option or a stock without actually owning it, you are then considered to be short that security in your account.

#2

An option assignment occurs when an option owner exercises the option, and the option seller is assigned and must buy or sell the underlying stock at the strike price. Index options can’t be exercised prior to expiration, whereas equity options can.

#3

Volatility is the amount a stock price fluctuates without regard for direction. You should only concern yourself with two forms of volatility: historical volatility and implied volatility. Historical volatility is defined in textbooks as the annualized standard deviation of past stock price movements.

#4

Implied volatility is not based on historical pricing data of the stock. It is what the marketplace is implying the volatility of the stock will be in the future, based on the price of an option.

#5

The price of an option is derived from the cost of the option and the current stock price. If there are no options traded on a stock, there is no way to calculate implied volatility.

#6

Implied volatility is a dynamic figure that changes based on activity in the options market. When implied volatility increases after a trade has been placed, it is good for the option owner and bad for the option seller.

#7

The 68% probability that a stock will cost between $40 and $60 a year later is based on general consensus in the marketplace. However, implied volatility isn’t an exact science, and there’s a 32% chance the stock will be outside this range.

#8

Market makers use implied volatility as an essential factor when determining what option prices should be. However, you can’t calculate implied volatility without knowing the prices of options. So some traders experience a bit of chicken or the egg confusion: which comes first, implied volatility or option prices.

#9

The implied volatility of an option’s at-the-money contract is the most accurate representation of what the market expects the underlying stock to do in the future. However, watch out for odd events like mergers, acquisitions, or rumors of bankruptcy. If any of these occur, it can throw a wrench into the monkeyworks and seriously mess with the numbers.

#10

Implied volatility can be used to gauge the likelihood that a stock will end up at a given price at the end of a 12-month period. But it can also be used to calculate a one standard deviation move over the lifespan of an option contract, no matter the time frame.

#11

As an example, let’s use stock XYZ, which is trading at $50 with an implied volatility of 20 percent. Remember: these quick and dirty calculations aren't 100 percent accurate, since they assume a normal distribution instead of a log normal distribution.

#12

Implied volatility is a tool that can help you predict the timing of a stock's move. It is not 100% accurate, but it can be a useful tool. Because option trading is difficult, we have to try to take advantage of every piece of information the market gives us.

#13

The normal distribution does not take into account the fact that a stock can only go down to zero, while it can theoretically go up to infinity. In a log normal distribution, on the other hand, a one standard deviation move to the upside may be larger than a one standard deviation move to the downside, especially as you move further out in time.

#14

The delta is the amount an option price is expected to move based on a $1 change in the underlying stock. Calls have a positive delta, between 0 and 1, which means if the stock price goes up and no other pricing variables change, the price of the call will go up. Puts have a negative delta, between 0 and -1, which means if the stock price goes up and no other pricing variables change, the price of the put will go down.

#15

Delta is the probability that an option will expire at least $. 01 in-the-money. It begins to change as an option gets closer to being in-the-money or out-of-the-money.

#16

As an option gets closer to its expiration, the probability that it will be in-the-money at expiration increases. As an option gets closer to its expiration, the delta increases as well.

#17

Time until expiration affects the probability that options will finish in- or out-of-the-money.

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Summary of Brian Overby's The Options Playbook , livre ebook

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