Beschreibung Option Fair Value: finding a statistical edge in options trading (English Edition). This book is about fairness — the fairness in the financial derivatives markets, namely in the options market. The central concept here is the Fair Value of an option contract providing no statistical edge to any side of the trade, neither buyer nor seller. If such a value differs from the observed market price, one side has a statistical advantage and mathematically expected profit in the trade. The opposite party has an expected loss.Importantly, this Fair Value does not depend on the market sentiment and traders views, which are reflected in the options market price. It is some kind of the theoretically “objective” price, and its discrepancy with the market is the primary reason for the mispricing and the major source of profits for one side and losses for another.In this book, a reader will find the approach to calculate the Fair Value based on the behavior of the underlying security in the past. It is similar to the fair insurance premium that depends on the past frequency of accidents and average severity of each. By the same way, the Fair Value of an option is the multiplication of the probability of its expiration in-the-money and its expected value in such a case.Although the underlying math is quite simple, the key question here is whether the past figures have any prediction power? Will the financial market repeat itself in the future, and can we rely on the probabilities derived from the past market behavior? To answer these tough questions, this book presumes that the past can do such a service and be a source of the desired probabilities — with some assumptions and data filters to be applied. Namely, it is presumed that the past will repeat itself in the future only if we rely only on those past data which resembles the current state of the market. In other words, we have to apply some filters to select from the past only those moments in which the market was in the condition similar to the current state. This is the second central concept of the book — Market Regimes Filtering by the volatility, long-term trends, short-term swings, etc.Another important topic is the Fair Value Confidence Intervals needed to identify if the observed mispricing is statistically significant. Moreover, the whole idea of the Fair Value is applicable to "backtest" various options multi-leg strategies like spreads, strangles, straddles, etc. It is even better than a simple options backtesting due to avoidance of the "sequential" nature of the conventional approach.This concept will be suitable for the wide range of investors and traders. From the passive long-only investors and their advisors looking for the portfolio protection in a smart way to more active options traders and hedge funds. Actually, everyone who has some proprietary strategy and backtesting results can exploit this methodology to find out whether a tail of headwind is expected for their planned trade.This book is not for the very beginners in trading, and some basic knowledge about options would be advisable. However, a reader is not expected to be good at the advanced mathematical areas like calculus, mathematical statistics, stochastic processes, and so on. Just basic algebra is enough to understand the whole concept (the book also has the introductory chapter). Even knowledge of options Greeks, implied volatility, and Black-Scholes model is not necessary to grasp the whole idea of the options Fair Value and to start trading options armed with the statistical edge.All these ideas and concepts are implemented in the free online software platform OptionSmile located at www.optionsmile.com.
Top 6 Books on Becoming an Options Trader ~ "Option Volatility and Pricing," by Sheldon Natenberg � "Fundamentals of Futures and Options Markets," by John Hull � "Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Dri
Basics of Hedge effectiveness testing and MeasureMent ~ as held for trading and measured at fair value through profit or loss are subject to measurement at amortized cost or fair value through Other Comprehensive Income (OCI). Derivative financial instruments, however, are always subject to measurement at fair value through profit or loss. As a result, an accounting treatment mismatch can occur when an organization uses derivative financial .
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: Customer reviews: Trading Options at ~ I plan to use his strategies to see if they work; based on my previous experience, I believe that they will as most options are absolute true value on Friday morning of expiration day and even a small underlying stock price change does impact the option price dramatically. An excellent book, well worth reading. I would have liked to see slighty clearer language and perhaps better summaries at .
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The Options Industry Council (OIC) - Home ~ Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.
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Option Strategies - Cboe ~ Here you will find strategies that have a strong focus on option price behavior including delta, time decay and implied volatility. Product-specific Strategies View various strategies that can be used with different index options such as the Standard & Poor's 500 (SPX), Cboe Volatility Index (VIX), and Russell 2000 (RUT).
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