Options Volatility Trading - Evening

This ''real time'' options trading course focuses on volatility trading. The class deals primarily with functioning as a Market Maker/Specialist, but also covers options as a means of expressing market opinions. The course begins with a notional amount of capital that the class trades. One portfolio is a volatility trading account, where participants act as options market makers. The other portfolio trades in a more speculative nature, using technical and fundamental analysis to make their trading decisions.

13-OCT-2008 -- 1-DEC-2008New YorkUSD$1975
NY Institute of Finance - Midtown5:45pm - 8:15pm Instructional Method:
Group-Live
Instructor(s): [ McCabe Hurley; ] Mon Level: Advanced
CPE Credits: 15.0

Traders, assistant traders, sales professionals, financial analysts, cash/money managers, auditors and compliance professionals.
No advance preparation required.
Students will be able to:
  • Describe the differences between option models
  • Estimate the probability statements made by a volatility figure
  • Compare the risk profiles of option trades with the synthetic equivalent position
  • Discuss how changes in different variables will affect the value of calls and puts (delta, gamma, theta, vega, & rho)
  • Discuss the principles of volatility trading and how this type of trading can be profitable (Identify ways to make money trading both a long and a short gamma position)
  • Differentiate the various risk profiles created in chosing one hedge over another
  • Calculate historical volatility and evaluate the resulting data
  • Describe skew and kurtosis
  • Outline how skew and kurtosis affect the prices of OTM options
  • Define implied volatility curves over time and price: the term structure of implied volatility & the implied volatility
Understand basic option position payoff profiles (hockeysticks), have a general understanding of delta, gamma, theta, vega and rho and be familiar with Microsoft Excel©.
"Great instructor - superb content"
  • Technical Analysis - Day
  • Fusion Analysis Suite
    • Scheduling Note
    There will be no class on Thursday, March 20th.
    Session 1: Option Pricing Models, Put-Call Parity & Synthetics

    Structure of the Course

      Review of Option Payoff Profiles

        Volatility

        • Normal distribution
        • Lognormal distribution
        • Interpreting volatility

        Option Pricing

        • What the options premium is telling us
        • An overview of the Black-Scholes Option Pricing Model
        • An overview of the Binomial Option Pricing Model

    Session 2: Strategy Review

    Put-Call Parity

    • The relationship between option prices and the underlying assets

    Strategy Review & Market Participants

    • Yield Enhancement Trades
    • Portfolio Insurance
    • Vertical Spreads
    • Butterflies

    Synthetic Positions

                              Homework: Review of Synthetics

    Session 3: Risk Sensitivity Numbers - ''The Greeks''

    The Greeks

    • Changes in the stock price (delta)
    • Changes in the delta (gamma)
    • Changes in time to maturity (theta)
    • Changes in volatility (vega)
    • Changes in interest rates (rho)

                                Homework: Review of Greeks

    Session 4: Volatility Trading - Defined

    Volatility Trading: Remaining delta neutral

    • Long Volatility using Calls
    • Long Volatility using Puts
    • Short Volatility using Calls

    Other Ways to Hedge

                                Homework: Review of Volatility Trading

    Session 5: Historical Volatility Analysis

    Estimating Volatility

    • Calculating historical volatility
    • ''Chunking'' time to discover the historical volatility characteristics of an underlying asset
    • Working with the HIST VOL spreadsheet
    • Frequency distribution
    • Comparing the Real Distribution of an asset versus Normal Distribution

                                Homework: Compiling Historical Volatility Research

    Session 6: Implied Volatility

    Volatility Skew

    • Implied Volatility for Out-of-the-Money Options
    • Measuring the difference between Real Distribution versus Normal Distribution
    • -- Skew and Kurtosis
    • Incorporating volatility smile into your trading plan

    Session 7: Term Structure of Implied Volatility

    Plotting Implied Volatility over different expirations

      Plotting Implied Volatility over different strike prices

    Session 8: Trading in the Real World

    Putting it all together to derive our Forecast Volatility

      Designing a trading plan

        Managing a Volatility Book

          Measuring Relative Volatility

            Dispersion Trades and RelVol trades

    Clients who register for this course will receive a complimentary 6 month subscription to the Financial Times and FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. Subscriptions will start within 6-8 weeks of the application process and are limited to one per client. For questions about your subscriptions call 800-628-8088 or email uscirculation@ft.com. US and Canada enrollees only.

    Lunch included for all students taking day classes.