Successful trading, says Euan Sinclair, is about developing a consistent process. You must have a goal; you must find trades with a clear statistical edge; you must capture that edge and size each trade in a way that is consistent with your goal. Everything else you do must be done within this framework. In "Volatility Trading", Sinclair offers you a quantitative model for measuring volatility in order to gain an edge in your everyday option trading endeavors. With an accessible, straightforward approach, he guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation. In addition, Sinclair explains the often-overlooked psychological aspects of trading, revealing both how behavioral psychology can create market conditions traders can take advantage of-and how it can lead them astray.Psychological biases, he asserts, are probably the drivers behind most sources of edge available to a volatility trader. Your goal, Sinclair explains, must be clearly defined and easily expressed - if you cannot explain it in one sentence, you probably aren't completely clear about what it is. The same applies to your statistical edge. If you do not know exactly what your edge is, you shouldn't trade. He shows how, in addition to the numerical evaluation of a potential trade, you should be able to identify and evaluate the reason why implied volatility is priced where it is, that is, why an edge exists.This means it is also necessary to be on top of recent news stories, sector trends, and behavioral psychology. Finally, Sinclair underscores why trades need to be sized correctly, which means that each trade is evaluated according to its projected return and risk in the overall context of your goals. As the author concludes, while we also need to pay attention to seemingly mundane things like having good execution software, a comfortable office, and getting enough sleep, it is knowledge that is the ultimate source of edge. So, all else being equal, the trader with the greater knowledge will be the more successful. This book, and its companion CD-ROM, will provide that knowledge. The CD-ROM includes spreadsheets designed to help you forecast volatility and evaluate trades together with simulation engines.
Introduction.The Trading Process.Chapter 1. Option Pricing.The Black Scholes Merton Model.Summary.Chapter 2. Volatility Measurement and Forecasting.Defining and Measuring Volatility.Definition of Volatility.Alternative Volatility Estimators.Close to Close Estimator.Parkinson Estimator.Garman Klass Estimator.Rogers Satchell Estimator.Yang Zhang Estimator.Using Higher Frequency Data.Forecasting Volatility.Maximum Likelihood Estimation.Forecasting the Volatility Distribution.Summary.Chapter 3. Implied Volatility Dynamics.Volatility Level Dynamics.Smile Dynamics.Strengths.Weaknesses.Summary.Chapter 4. Hedging.Ad-Hoc Hedging Methods.Hedging at Regular Intervals.Hedging to a Delta Band.Hedging Based On Underlying Price Changes.Utility Based Methods.The Asymptotic Solution of Whalley and Wilmott.The Double Asymptotic Method of Zakamouline.Estimation of Transaction Costs.Strengths.Weaknesses.Aggregation of Options on Different Underlyings.Summary.Chapter 5. Hedged Option Positions.Discrete Hedging and Path Dependency.Volatility Dependency.Summary.Chapter 6. Money Management.Ad-Hoc Schemes.The Kelly Criterion.Good Points.Bad Points.Alternatives to the Kelly Criterion.Trade Sizing in a Continuously Changing Setting.A Simple Approximation.Summary.Chapter 7. Trade Evaluation.General Planning Procedures.Risk Adjusted Performance Measures.The Sharpe Ratio.Alternatives to the Sharpe Ratio.Setting Goals.Persistence of Performance.Relative Persistence.Absolute Persistence.Summary.Chapter 8. Psychology.Self Attribution Bias.Overconfidence.The Availability Heuristic.Short Term Thinking.Loss Aversion.Conservatism and Representativeness.Confirmation Bias.Hindsight Bias.Anchoring and Adjustment.Summary.Chapter 9. Lifecycle of a Trade.Pre-Trade Analysis.June 25th 2007.June 26th 2007.June 27th 2007.June 28th 2007.June 29th 2007.July 2nd 2007.July 3rd 2007.Post-Trade Analysis.Chapter 10. Conclusion.Execution Ability.Concentration.Product Selection.Appendix A. Model Free Implied Variance and Volatility.The VIX Index.Appendix B. Spreadsheet Instructions.Garch.Volatility Cones and Skew and Kurtosis Cones.Daily Option Hedging Simulation.Trade Evaluation.Trading Goals.Corrado Su Skew Curve.Mean Reversion Simulator.Reader Resources.Essential Books.Thought Provoking Books.Useful Websites.References.About the CD-ROM.Index.
(0 Comentarios)
