Tải thêm nhiều sách tại : www.com AN INTRODUCTION TO OPTIONS TRADING Frans de Weert Tải thêm nhiều sách tại : www.com Tải thêm nhiều sách tại : www.com AN INTRODUCTION TO OPTIONS TRADING Tải thêm nhiều sách tại : www.com The Securities & Investment Institute Mission Statement: To set standards of professional excellence and integrity for the investment and securities industry, providing qualifications and promoting the highest level of competence to our members, other individuals and firms. The Securities and Investment Institute is the UK’s leading professional and membership body for practitioners in the securities and investment industry, with more than 16,000 members with an increasing number working outside the UK. It is also the major examining body for the industry, with a full range of qualifications aimed at people entering and working in it. More than 30,000 examinations are taken annually in more than 30 countries.
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International Ltd, Padstow, Cornwall. This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production. Tải thêm nhiều sách tại : www.com To Jan and Annelies Tải thêm nhiều sách tại : www.com Tải thêm nhiều sách tại : www.com CONTENTS Preface xiii Acknowledgements xv Introduction xvii 1 OPTIONS 1 1.2 American versus European options 7 1.4 Early exercise of American options 13 1.6 Put–call parity 16 2 THE BLACK–SCHOLES FORMULA 21 2.1 Volatility and the Black–Scholes formula 28 2.2 Interest rate and the Black–Scholes formula 29 2.3 Pricing American options 31 Tải thêm nhiều sách tại : www.com viii CONTENTS 3 DIVIDENDS AND THEIR EFFECT ON OPTIONS 33 3.2 Pricing of stock options including dividends 35 3.3 Pricing options in terms of the forward 36 3.4 Dividend risk for options 38 3.5 Synthetics 39 4 IMPLIED VOLATILITY 41 4.2 Strategy and implied volatility 45 5 DELTA 47 5.2 The most dividend-sensitive options 57 5.3 Exercise-ready American calls on dividend paying stocks 57 6 THREE OTHER GREEKS 61 6.3 Vega 69 Tải thêm nhiều sách tại : www.com CONTENTS ix 7 THE PROFIT OF OPTION TRADERS 73 7.1 Dynamic hedging of a long call option 74 7.1 Hedging dynamically every $1 75 7.2 Hedging dynamically every $2 76 7.2 Dynamic hedging of a short call option 77 7.1 Hedging dynamically every $1 78 7.2 Hedging dynamically every $2 79 7.3 Profit formula for dynamic hedging 80 7.1 Long call option 81 7.2 Short call option 83 7.4 The relationship between dynamic hedging and 86 7.5 The relationship between dynamic hedging and when the interest rate is strictly positive 88 7.6 Conclusion 91 8 OPTION GREEKS IN PRACTICE 93 8.1 Interaction between gamma and vega 94 8.2 The importance of the direction of the underlying share to the option Greeks 97 8.3 Pin risk for short-dated options 98 8.4 The riskiest options to go short 99 Tải thêm nhiều sách tại : www.com x CONTENTS 9 SKEW 101 9.1 What is skew? 102 9.2 Reasons for skew 103 9.3 Reasons for higher volatilities in falling markets 104 10 SEVERAL OPTION STRATEGIES 105 10.5 Strangle 112 11 DIFFERENT OPTION STRATEGIES AND WHY INVESTORS EXECUTE THEM 117 11.1 The portfolio manager’s approach to options 118 11.2 Options and corporates with cross-holdings 119 11.3 Options in the event of a takeover 120 11.4 Risk reversals for insurance companies 122 11.5 Pre-paid forwards 123 11.6 Employee incentive schemes 126 11.7 Share buy-backs 126 Tải thêm nhiều sách tại : www.com CONTENTS xi 12 TWO EXOTIC OPTIONS 129 12.1 The quanto option 130 12.2 The composite option 135 13 REPO 137 13.2 Repo in case of a takeover 139 13.3 Repo and its effect on options 140 13.4 Takeover in cash and its effect on the forward 141 Appendices A PROBABILITY THAT AN OPTION EXPIRES IN THE MONEY 143 B VARIANCE OF A COMPOSITE OPTION 145 Bibliography 149 Index 151 Tải thêm nhiều sách tại : www.com Tải thêm nhiều sách tại : www.com PREFACE This book is appropriate for people who want to get a good overview of options in practice. It especially deals with hedging of options and how option traders earn money by doing so.
To point out where the profit of option traders comes from, common terms in option theory will be ex- plained, and it is shown how they relate to this profit. The use of mathematics is restricted to a minimum. However, since mathematics makes it possible to lift analyses to a non-superficial level, mathematics is used to clarify and generalize certain phenomena. The aim of this book is to give both option practitioners as well as interested individuals the necessary tools to deal with options in practice.
Throughout this book real life examples will illustrate why investors use option structures to satisfy their needs. Although understanding the contents of this book is a prerequisite for becoming a good option practitioner, a book can never produce a good trader. Ninety percent of a trader’s job is about dealing with severe losses and still being able to make the right decisions if such a loss occurs. The only way to become a good trader is to accept that, when helping clients to execute their option strategies, the trader will inevitably Tải thêm nhiều sách tại : www.com xiv PREFACE end up with positions where the risk reward is against him but the odds are in his favour.
For that reason a one- off loss will almost always be larger than a one-off gain. But, if a trader executes many deals he should be able to make money on the small margin he collects on every deal even if he gets a few blow-ups. Tải thêm nhiều sách tại : www.com ACKNOWLEDGEMENTS This book is based on knowledge acquired during my work as a trader at Barclays Capital. Therefore, I would like to thank my colleagues at Barclays Capital who have been very helpful in teaching me the theory and practice of options.
At Barclays Capital I would especially like to thank Faisal Khan and Thierry Lucas for giving me all the opportunities to succeed in mastering and practising option trading. I would also like to thank Thierry Lucas for his many suggestions and corrections when reviewing my work and Alex Boer for his mathematical insights. I would especially like to thank Karma Dajani for first giving me a great foundation in probability theory, then supervising my graduate dissertation in mathematics and, lastly, reviewing this book. Special thanks goes out to my father, Jan de Weert, for having been a motivat- ing and helpful force in mastering mathematics through- out my life, and for checking the book very thoroughly and giving me many suggestions in rephrasing sentences and formulae more clearly.
Tải thêm nhiều sách tại : www.com Tải thêm nhiều sách tại : www.com INTRODUCTION Over the years derivative securities have become increas- ingly important. Examples of these are options, futures, forwards and swaps. Although every derivative has its own purpose, they all have in common that their values depend on more basic variables like stocks and interest rates. This book is only concerned with options, but once the theory behind options is known, knowledge can easily be expanded to other derivatives.
This book has three objectives. The first is to introduce terms commonly used in option theory and explain their practical interpretation. The second is to show where option traders get their profit and how these commonly used terms relate to this profit. The last objective is to show why companies and investors use options to satisfy their financial needs.
Tải thêm nhiều sách tại : www.com Tải thêm nhiều sách tại : www.com Chapter 1 OPTIONS Tải thêm nhiều sách tại : www.com 2 AN INTRODUCTION TO OPTIONS TRADING O ptions on stocks were first traded on an organized exchange in 1973. That very same year Black and Scholes introduced their famous Black–Scholes formula. This formula gives the price of an option in terms of its parameters, like the underlying asset, time to maturity and interest rate. The formula and the variables it depends on will be discussed in more detail in the next chapters.
Since 1973 option markets have grown rapidly, not only in volumes but also in the range of option products to be traded. Nowadays, options can be traded on many differ- ent exchanges throughout the world and on many differ- ent underlying assets. These underlying assets include stocks, stock indices, currencies and commodities. There are two general kinds of options, the call option and the put option.
A call option gives the holder the right, but not the obligation, to buy the underlying asset for a pre-specified price and at a pre-specified date. A put option gives the holder the right, but not the obligation, to sell the underlying asset for a pre-specified price and at a pre-specified date. This pre-specified price is called the ‘strike price’; the date is known as the ‘expiration date’, or ‘maturity’.
