How to Price and Trade Options: Identify, Analyze, and Execute the Best Trade Probabilities, + Website

EXECUTE THE BEST OPTIONS TRADES AND REDUCE RISK

How to Price and Trade Options taps into the power of the Nobel Prize–winning Black–Scholes model to offer a winning strategy for investing in the options market. Written by options expert Al Sherbin, this invaluable resource looks at the basis for probability theory in options trading and explains how to stack the odds in your favor. The companion website includes videos that walk you through various probability scenarios, pre–formatted spreadsheets, and code.

No matter what your level of investing experience from novice to Wall Street professional How to Price and Trade Options offers the information and techniques needed to enhance your portfolio with savvy options trades. Drawing on unique research studies, Sherbin reviews both defined and undefined risk strategies and shows how to use simple cost basis reduction techniques to enhance investment returns.

With Al Sherbin as your guide, you will learn how simple it can be to deploy probability–based trading strategies.

Introduction

Chapter 1: Why Trade Options?

Strategic Without Being Directional

A Word about Leverage

Options Are a Decaying Asset

Insurer or Insured?

Probability of Making Money

Market Efficiency

Tired, Worn out Metaphors

Chapter 2: What to Look For In a Broker

Brokerages versus Banks

Depth of a Broker s Pockets

Trading Risk Management

Learning from Recent Events

Account Types

Commissions

Interest Rates

Stock Borrow and Loan

Trading Platforms

Conclusion

Chapter 3: Building the Foundation

Options Pricing Models

Option Pricing Model Inputs

Historical Data as Input into the Implied Volatility of anUnderlying

Implied Volatility as a Predictor of Stock Movement andProbabilities

The Distribution Curve

Breakout Stocks

Actual versus Historical Distribution Curves

Chapter 4: Trade Probabilities: What to Look For

The Results

How to Calculate Option Probabilities

Chapter 5: Choosing Your Trades

Choosing Your Underlying

Making an Assumption

Chapter 6: Choosing a Strategy

Defined Risk Trades

Credit Spreads

Debit Spreads

Butterfly

Iron Condor

Calendar Spreads

Undefined Risk Trades

The Straddle

The Strangle

Short Naked Puts

Ratio Spreads and Back Spreads

What Time to Expiration Should My Trades Have?

Trading Earnings Announcements

Chapter 7: Exiting Trades

The Variables

The Kelly Criterion

Morning Routine

To Log Your Trades or Not to Log Your Trades

Chapter 8: Executing Your Trades

Order Types

Chapter 9: Portfolio Management

Two Types of Risk

The Goal: Diversification Minimizing Unique Risk

The Methods: Correlation and Number of Positions

Identifying and Mitigating Systematic Risk

Trade Sizing

Early Exercise

Conclusion

About the Website

About the Author

Index

AL SHERBIN has been a professional options trader for over 26 years without a single losing year and is the Managing Member of Al on Options, LLC.