Volatility Trading, + Website [Hardcover]

In this second edition of this bestselling book, Sinclair offers a quantitative model for measuring volatility in order to gain an edge in 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. This new edition includes new chapters on the dynamics of realized and implied volatilities, trading the variance premium and using options to trade special situations in equity markets.

• Filled with volatility models including brand new option trades for quant traders
• Options trader Euan Sinclair specializes in the design and implementation of quantitative trading strategies

Volatility Trading, Second Edition + Website outlines strategies for defining a true edge in the market using options to trade volatility profitably.

Acknowledgments xi

Introduction to the Second Edition xiii

CHAPTER 1 Option Pricing 1

The Black-Scholes-Merton Model 1

Modeling Assumptions 7

Conclusion 11

Summary 11

CHAPTER 2 Volatility Measurement 13

Defining and Measuring Volatility 13

Definition of Volatility 14

Alternative Volatility Estimators 20

Using Higher-Frequency Data 29

Summary 33

CHAPTER 3 Stylized Facts about Returns and Volatility 35

Definition of a Stylized Fact 35

Volatility Is Not Constant 36

Characteristics of the Return Distribution 40

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