future trading strategy

Jun 28th, 2015
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Academy of Art University
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Trading Option Greeks  Option can be used to take a bullish or bearish position, given a directional forecast  We can trade sideways nontrending stocks or volatile stocks as well  Profit or loss can be independent of whether stock rises or falls  Option trading is non-linear. Hence, more opportunities can be exploited by trading options than trading stock

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ADVANCED OPTIONGREEKSBlack Scholes Model ReCALL OptionC = SN (d1 ) Ke rT N(d 2 )where N(di) = the cumulative standard normal distribution function, evaluated at di,and:d1 =ln(S/K) + (r + 2 /2)T Td 2 = d1 TN(-di) = 1-N(di)Black Scholes Model - RThere are many packages available for optionpricing in R. We will be using fOptionsinstall.packages(fOptions)library(fOptions)Black Scholes Model - RTrading Option GreeksOption can be used to take a bullish or bearishposition, given a directional forecastWe can trade sideways nontrending stocks or volatilestocks as wellProfit or loss can be independent of whether stock rises orfallsOption trading is non-linear. Hence, moreopportunities can be exploited by trading optionsthan trading stockOption TraderOption can be used to take a bullish or bearishposition, given a directional forecastWe can trade sideways nontrending stocks or volatilestocks as wellProfit or loss can be independent of whether stock rises orfallsOption trading is non-linear. Hence, moreopportunities can be exploited by trading optionsthan trading stockGREEKSGreeksThe greeks are a product of option pricing modeland each greek letter represents a specific sensitivityto influences on the options valueThe five greeks commonly used by traders are,Delta Gamma Theta Vega RhoDelta () FormulaFormula for delta of call opt

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