Options Math for Traders: How to Pick the Best Option Strategies for Your Market Outlook

  • 4h 34m
  • Scott Nations
  • John Wiley & Sons (US)
  • 2012

A practical guide to the math behind options and how that knowledge can improve your trading performance

No book on options can guarantee success, but if a trader understands and utilizes option math effectively, good things are going to happen. The idea behind Options Math for Traders is to help retail option traders understand some of the basic tenants and enduring relationships of options, and option math, that professional and institutional traders rely on every day. This book skillfully highlights those strategies that are inherently superior from an option math point of view and explains what drives that superiority while also examining why some strategies are inherently inferior.

The material is explained without complex equations or technical jargon. The goal is to give you a solid conceptual foundation of options behavior so you can make more informed decisions when choosing an option strategy for your market outlook. Topics covered include the volatility premium, because over time, options will cost more than they are ultimately worth; skew, wherein far out of the money put options may seem cheap from an absolute term, but are very expensive in relative terms; and the acceleration in option price erosion. The book also has a companion Website, which includes links to those sites that can scan for the best strategies discussed in the book.

  • Explains, in a non-technical manner, the mathematical properties of options so that traders can better select the right options strategy for their market outlook
  • Written by top options expert Scott Nations

Most independent traders have an imperfect understanding of the math behind options pricing. With Options Math for Traders as your guide, you'll gain valuable lessons in this area and discover how this information can improve your trading performance.

About the Author

SCOTT NATIONS is President and CIO of NationsShares, a division of Fortress Trading, Inc. Previously, he was head trader for Sovereign Capital, a proprietary trading firm, and a floor trader at both the Chicago Board of Trade and the Chicago Mercantile Exchange. Nations is also a financial engineer, creating, testing, patenting, and licensing a number of sophisticated option-based and option-enhanced products including the Nations Enhanced Covered Call Index; the Nations Enhanced Collar Index; the Nations Option Levered Index; and the Nations VolDex. He appears on CNBC several times each week and serves as one of the regular panelists on CNBC's weekly Options Action show.

In this Book

  • The Basics
  • Direction, Magnitude, and Time
  • Volatility
  • Option Pricing Models and Implied Volatility
  • The Volatility Risk Premium
  • Implied Volatility and Skew
  • Time Value and Decay
  • The Bid/Ask Spread
  • Volatility Slope
  • Covered Calls
  • Selling Puts
  • Calendar Spreads
  • Risk Reversal
  • Vertical Spreads