The Option Trader's Guide to Probability: Volatility and Timing (Wiley Trading)

Options are a very attractive investment, primarily because of the degree of leverage and enhanced profit potential associated with them. But they can also be very dangerous if you don?t know how to handle elements such as implied volatility, time decay, and out-of-the-money versus in-the-money options.

In The Option Trader?s Guide to Probability, Volatility, and Timing, expert Jay Kaeppel explains these issues and provides you with a working knowledge of various option strategies that are appropriate for any given situation. Whether you?re a new trader or "returnee" to the options market, this book will teach you how to successfully trade options. Kaeppel sets the stage by covering basics such as option definitions and option pricing. He then quickly moves to the heart and soul of this unique investment vehicle by analyzing both the risk and profit potential of various trading strategies. Kaeppel further sets his approach apart by providing his unique perspective on risk curves?a revolutionary new trading tool?to maximize the tradeoff between reward and risk on each and every trade.

This comprehensive guide explains the different strategies available as well as when to use each of them. Strategies include guidelines for determining when to buy undervalued options and when to sell overvalued ones. You?ll also learn how to accurately assess volatility and profit from disparities in implied volatilities of different options. To help you safeguard your money, you?ll discover valuable strategies that will teach you when to take a profit and when to cut your losses.

Options are different in many ways from other forms of investment. To profit from them, you must have a firm understanding of what they are, how they work, and how they must be traded. The Option Trader?s Guide to Probability, Volatility, and Timing addresses these topics, and many more, to give you a well-rounded overview of this investment vehicle. Filled with practical advice from an expert in the field and real-world strategies that have stood the test of the options market, this book is an invaluable resource for anyone looking to trade options intelligently and confidently.

If you?re serious about trading options, read The Option Trader?s Guide to Probability, Volatility, and Timing and learn how to achieve consistent profits in one of the most lucrative markets in the world.

The leverage and profit potential associated with options makes them very attractive. But you must be prepared to take the financial risks associated with options in order to reap the rewards.

The Option Trader?s Guide to Probability, Volatility, and Timing will introduce you to the most important concepts in options trading and provide you with a working knowledge of various options strategies that are appropriate for any given situation. Whether you?re a new trader or "returnee" to the options market, this book will not just teach you about options, it will teach you how to successfully trade them.

This comprehensive trading guide includes:

• An overview of the most valuable uses for options
• An introduction to basic option terminology
• An explanation of the most useful trading strategies available, including risk curves, and the conditions to look for when determining which strategies to employ
• Guidelines for exiting a trade at a loss and exiting a trade at a profit
• And much more

In clear, easy-to-follow terms, The Option Trader?s Guide to Probability, Volatility, and Timing arms you with the facts you need to understand options as well as choose and use profitable options trading strategies. From time decay, market timing, and volatility to naked options, covered calls, and butterfly spreads, this comprehensive guide will help you trade options intelligently and confidently.

A comprehensive guide that lets you play the options game with confidence

Due to the uncontrollable elements associated with options, many traders find themselves without practical strategies for specific situations. The Option Trader's Guide to Probability, Volatility, and Timing offers traders a variety of strategies to trade options intelligently and confidently in any given situation. With detail and objectivity, this book sets forth risk assessment guidelines, explains risk curve analysis, discusses exit methods, and uncovers some of the biggest mistakes options traders make. The Option Trader's Guide provides readers with strategies for trading options as well as expert advice on when to implement those strategies.

JAY KAEPPEL is Director of Research at Essex Trading Company, Ltd., a leading developer of trading software for options and futures traders. He is also an active CTA (commodity trading advisor). With over twenty years' experience, Jay's expertise as a system developer has been noted by Technical Analysis of Stock & Commodities magazine and Formula Research, a renowned trading system advisory newsletter. His articles and interviews have appeared in leading industry publications, and his previous books include The Four Biggest Mistakes in Options Trading and The Four Biggest Mistakes in Futures Trading.

Introduction.

The Basics of Options.

Reasons to Trade Options.

Option Pricing.

Time Decay.

Volatility.

Probability.

Market Timing.

Trading Realities.

Important Concepts to Remember.

Overview of Trading Strategy Guides.

Buy a Naked Option.

Buy a Backspread.

Buy a Calendar Spread.

Buy a Straddle.

Sell a Vertical Spread.

Sell a Naked Put.

Write a Covered Call.

Enter a Butterfly Spread.

Placing Trades.

Epilogue: Some Random Thoughts for Option Traders.

Appendix A: PROVEST Option Trading Method Criteria.

Appendix B: Option Exchanges, Option Brokers, Option Symbols, and Option Volume.

Index.