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First Edition Design Publishing - W. Given Kerry

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120 pages

English

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The new book, Time Is Money, comes from Kerry Given, the author of No Hype Options Trading, and he discusses the concept of non-directional trading. If you have some experience with options trading, you have probably heard the term, delta neutral trading. This is one of the buzzword phrases that has been used in marketing options trading education, trading alert services, and describing the strategies of hedge funds. Delta neutral does sound exotic - is this the trading secret I have been searching for? But we will see clearly in this book that there is no "secret" to options trading. Non-directional trading is a lesser known term and may be considered a subset of delta neutral trading. This book does an excellent job of distinguishing delta neutral trading from non-directional trading. These are not synonyms. The trader may use a delta neutral strategy because he is predicting a sideways price pattern or price movement within a modest sized channel. The delta neutral trade is just one choice among several options strategies. If the trader is bullish, he selects a bullish trade; if he is bearish, he selects a bearish trade. And if his prediction is for a sideways price movement, he selects a delta neutral trade. This trader is using a delta neutral trading strategy as a directional trade; it is based on the trader's prediction for the future price movement of the underlying stock or market index. The directional trader has a specific interest with particular knowledge about an individual stock or index and a prediction for its future value. Dr. Given distinguishes non-directional trading from delta neutral trading in one critically important way. If one is trading non-directionally, he develops a series of rules for entry, exit and adjustment of a delta neutral trading strategy and then enters and manages the position dictated by those rules month after month. He has made no prediction of the future; he just manages the position each day based on the market's price move that day. The trader is no longer predicting the market's next move tomorrow; the trader is reacting to what the market gives him today. The non-directional trader tries his best not to predict where the market is going tomorrow. Instead, he focuses on where the market is today and the actions his rules dictate. He follows the rules. This may seem like a fine distinction in semantics, but give Time Is Money a try. Focus on what the market is doing today and what your rules dictate. Throw away your crystal ball.

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Personal finance

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Publié par	First Edition Design Publishing
Date de parution	01 avril 2015
Nombre de lectures	0
EAN13	9781622877607
Langue	English

Informations légales : prix de location à la page 0,0960€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

TIME IS MONEY
The Power Of Non-Directional Options Trading

Kerry W. Given, Ph.D.
Founder, Parkwood Capital, LLC
Co-Founder, G&L Capital Management, LLC
Time is Money
Copyright ©2015 Kerry W. Given

ISBN 978-1622-877-57-7 HC
ISBN 978-1622-877-58-4 PRINT
ISBN 978-1622-877-60-7 EBOOK

LCCN 2014955899

February 2015

Published and Distributed by
First Edition Design Publishing, Inc.
P.O. Box 20217, Sarasota, FL 34276-3217
www.firsteditiondesignpublishing.com

ALL R I G H T S R E S E R V E D. No p a r t o f t h i s b oo k pub li ca t i o n m a y b e r e p r o du ce d, s t o r e d i n a r e t r i e v a l s y s t e m , o r t r a n s mit t e d i n a ny f o r m o r by a ny m e a ns ─ e l e c t r o n i c , m e c h a n i c a l , p h o t o - c o p y , r ec o r d i n g, or a ny o t h e r ─ e x ce pt b r i e f qu ot a t i o n i n r e v i e w s , w i t h o ut t h e p r i o r p e r mi ss i on o f t h e a u t h o r or publisher .
To Charlotte, my best friend, confidante and adviser. I am a better person due to your influence in my life.

In memory of our son and fellow option trader,
Sean (1975 - 2007). I miss our discussions of Google.
Acknowledgments

When I look back over my life to this point, I realize that I owe this book and many other accomplishments to my wife, Charlotte, who has been a wonderful life partner. I am a better person because of her being in my life. Her unwavering support, influence, and excellent advice have been crucial to my success.
I owe thanks to many teachers, especially Jim Bittman and Russell Rhoads at the Options Institute of the Chicago Board Options Exchange. My continued conversations with Jim Bittman through the years have been enlightening. His support and advice have been invaluable for both my options trading and the development of this book.
Most of all, I wish to thank my students. Their support and encouragement are very much appreciated. Through the years, I have listened to my students and learned of the common misunderstandings and pitfalls that face beginning options traders. My coaching courses and this book are better products as a result.
Ray Lilja was my first coaching student in 2007 and that led to the start-up of Parkwood Capital, LLC. His support and encouragement have led to our partnership in founding G&L Capital Management, LLC. Thank you, Ray, for your trust and support.
Royal Ellinger, D.D.S., graciously offered to read the first draft of the manuscript and his comments and observations have resulted in this being a much better book. Thank you, Royal, for the time and thought you invested in this project.
Table of Contents
Acknowledgments
Introduction
CHAPTER ONE
Where Is My Risk?
The Opportunistic Model
The Insurance Model
Non-Directional Trading
Summary
CHAPTER TWO
Who Was Gauss?
How Does It Work In Real Life?
Calculating Probabilities
Using Probabilities In Options Trading
Put The Probabilities On Your Side
Is Trading Options Gambling?
A Zero-Sum Game?
Summary
CHAPTER THREE
The Lowly Stop Loss
The 200% Rule
Adjusting the Position
Why Do We Have To Adjust So Often?
Money Management
Summary
CHAPTER FOUR
What Are the Greeks?
Individual Option Greeks vs. Position Greeks
Which Trade Is Best In This Market?
Time Decay: Your Profit Machine
Managing the Trade With the Greeks
Summary
CHAPTER FIVE
What Are All These Different Volatilities?
Implied Volatility As A Measure Of Risk
Implied Volatility Skews
Implied Volatility and Options Pricing
Implied Volatility at the Beginning of the Trade
Watch Your Vega!
Summary
CHAPTER SIX
How Do Weekly Options Work?
What Do The Greeks Tell Us?
What Else Is Different?
Possible Strategies With Weekly Options
What Can Go Wrong?
Summary
CHAPTER SEVEN
Building the Vertical Spread
Effects of Implied Volatility
Early Exercise
Expiration and Exercise
Margin Requirements
Selection Of Strike Prices
Summary
CHAPTER EIGHT
The Two Deadly Emotions
How Did You Succeed In Life?
The Two-Headed Monster
Summary
CHAPTER NINE
Vega Risk
Volatility Skews
The Search For Candidates
Trade Management and Adjustment
Early Exercise
OTM Calendar Spreads
Summary
CHAPTER TEN
Single Or Double?
The Search For Candidates
Determining The Optimal Strike Prices
Trade Management and Adjustment
Summary
CHAPTER ELEVEN
Constructing The Butterfly Spread
Iron Butterfly Spreads
Margin Requirements
Trade Management And Adjustment
Back Testing The Butterfly Trading Systems
Closing Butterfly Spreads
CHAPTER TWELVE
Building The Double Diagonal Spread
Trade Management And Adjustment
Back Testing the Double Diagonal
Double Diagonals vs. Double Calendars
Summary
CHAPTER THIRTEEN
Building The Condor Spread
Building The Iron Condor Spread
The Debit Condor vs. The Iron Condor
My Condor May Not Be Your Condor
The Best Iron Condor Strategy
Stocks, Indexes or ETFs?
Condor Safety Nets
Trade Management And Adjustment
Volatility And The Iron Condor
Back Testing The Iron Condor Trading Systems
Summary
CHAPTER FOURTEEN
The Myth Of the Best Strategy
Consider the Current Market
Where Is Volatility?
How Does The Trade Make Money?
Compare and Contrast
The Role of Diversification
Summary
CHAPTER FIFTEEN
Market Crashes
Trending Markets
My Mistakes
Summary
CHAPTER SIXTEEN
How Does a Market Maker Make Money?
Does the Retail Trader Have a Chance?
Milking the Cows
Summary
Introduction

Traders love to make predictions. Even better, they enjoy collecting a nice profit when their prediction proves to be correct. This may be the most fundamental sense of satisfaction that traders enjoy. Many successful traders have been interviewed through the years and a common assertion is that making money wasn’t the source of their motivation; they often regard the money as only a “score card” of sorts. The core sense of accomplishment arose from the thrill of the hunt and the satisfaction of having one’s analysis being proven correct.
For some traders, the analysis of the fundamentals of a company and/or a market is the principal activity leading to their conclusion to buy a particular stock or an options position on that stock. This may include a detailed analysis of the balance sheet and various financial figures, such as book value, debt to equity ratios, current assets to current liabilities ratios, and many more financial measures. Many fundamental analysts track the price to earning ratio and analyze the business prospects to attempt to predict the future earnings stream. The most famous of the fundamental analysts, Warren Buffett, emphasizes the comparison of the company’s book value to the current stock price. Buffett’s mentor, Benjamin Graham, outlined the best case for fundamental analysis of stocks in his famous book, The Intelligent Investor .
Other traders rely on technical analysis, focusing exclusively on the stock’s price chart. John Murphy is one of the best-known technical analysts, and his book, Technical Analysis of the Financial Markets , remains a best seller. The essence of technical analysis is that all of the relevant information for the trader is contained in the stock’s price and volume behavior. Technical analysts draw trend lines, identify levels of support and resistance, analyze candlestick patterns, monitor trading volume, plot the Bollinger bands, calculate various statistical measures, and so on.
Many traders employ a combination of both fundamental and technical analysis. Regardless of the techniques used for the analysis, a significant amount of work and study goes into the trader’s thought process that leads to the initiation of the trade.
Therefore, the trader has invested a lot of time and thought into the trade even before she invests her hard earned capital. It is easy to figuratively walk away from an activity or hobby where I have not invested any time. But as I devote more time and analysis to the project, my level of personal ownership grows. In many avenues of life that principle serves us well. Industrial empires have been built largely due to the perseverance of the entrepreneur who was determined that his product or service was indeed superior. But this same principle can be the undoing of the trader. Many traders continue to invest in a position and buy additional shares of a stock as the price declines, all the while telling everyone how his analysis concludes that the stock is trading at a bargain price. I remember friends telling me how they were buying Lucent and WorldCom at bargain basement prices and urged me to get on board. To their surprise, those stocks continued to trade lower and lower. Similar behavior occurs when the trader holds a losing position and the losses continue to build; he is convinced that his analysis will be proven correct and the investment will turn around “soon”. His pride is on the line.
It is extremely difficult for the trader to admit that his analysis was wrong and close the trade. Losing the money is actually easier than admitting that all of that research and deductive reasoning was somehow flawed. And this is magnified if he told several of his friends about this stock and urged them to take advantage of this trade. How does he tell them he was wrong?
Many, if not all of us traders, have capital to trade because we have been successful in some other career. A successful attorney doesn’t succeed when he misses critical case law 30% of the time. Imagine going to a surgeon to have your appendix removed and the nurse tells you this surgeon is pretty good; he only loses patients in appendectomies a few times every month. The typical professional who is learning to trade stocks and/or options has spent twenty or thirty years in his career environment of high percentage play. He has been trained that hard work and extra effort will make the