Advanced Options Trading in plain English
What you'll learn
- Understand the importance of an options trading plan and how options expiration impacts it
- Review the impact of the exercise and assignment processes in options trading
- Determine how pin risk and dividend risk can have an impact on your options trading
- Use the Delta-Gamma approximation formula
- Apply the quick formulas for at-the-money straddles and 20-delta strangles
- Analyze the differences in distribution between an option's intrinsic and extrinsic values
- Understand the principles behind the Black-Scholes option pricing model
- Assess the impact of volatility skew and term structure in options strategies
- Understand put-call parity and its applications such as synthetic positions, box spreads and the impact of hard-to-borrow status on option pricing
- Apply put-call parity to positions such as covered calls, condors, butterflies and vertical spreads
- Analyze second and third order greeks and how they react to changes in underlying price, volatility and time to expiration
- Review premium-selling strategies by implied volatility level and directional outlook
- Learn how to trade the VIX using VIX Futures, VIX ETFs and ETNs and VIX Options
- Learn to adjust and roll options positions
- Understand how to manage an Options Portfolio and all its components to maximize profits and minimize risks
- There is no financial, mathematical or trading-related requirement to take this course and become the best Option Trader you can be
- Some of the concepts might be better understood after finishing the "Options Trading in plain English for beginners" course here on Udemy
It is no surprise that options trading has been embraced by a growing number of traders as of late. The possibilities that options provide are endless and this is one of the reasons why retail and professional traders gravitate towards them as an integral part of their financial portfolios.
Whether it is for leverage, protection or strategic flexibility; calls and puts are now an important part of the financial products landscape. This is for example reflected in the prominence with which the VIX index is now reported on in mainstream financial media.
Although options are extremely powerful, part of their appeal is their apparent simplicity. Many option traders start out learning that calls are leveraged bullish instruments and puts are leveraged bearish instruments and while this is not incorrect, there is so much more at play here than meets the eye.
At some point traders venture beyond the limitations of simple option purchases and dabble in more complex strategies: selling options, vertical spreads, iron condors, butterflies, etc. It is then that the true power of options starts to become apparent. Along with this comes the need for a true deeper and more detailed understanding of both the principles behind option pricing and also the practical day-to-day operational activities related to actively managing an options portfolio.
In this course, you will learn the principles of option pricing theory with the sole objective of applying this knowledge in the market in a practical manner leading to better, more profitable and more efficient options trading in your own account.
Along with this, many operational details related to day-to-day option trading activities will also be reviewed. These have been gathered in the more than 20 years of experience trading options and ultimately having the scars along with lessons-learned to prove it. Although the operational environment for option traders has changed a lot in the last 20 years, many of the main principles remain the same and are deeply ingrained in any successful trader's mind. In this course you will learn the operational details, quirks and rules-of-thumb that will prevent any unpleasant surprise from happening in your trading and will lead to improving and refining your options trading edge.
As part of a balanced approach among concepts, theory and practice we will use the paperMoney by thinkorswim Options Trading platform, with information accessed directly from US Financial Markets. You will see how option trading theory aligns with reality in an actual live market with real financial data.
Also, in order to let you focus on the information being presented, the material used during the lessons will be available to be downloaded in the "Resources" section. By doing this you won't need to take notes related to the presentations since they will be available for you to download and review later., along with any spreadsheet used in the more formula-oriented lessons.
Finally, as part of an ongoing process to ensure that you get the most out of this course and that you are ready to take your options trading to the next level, you will be asked to take a quiz after each section. You will then be able to know which advanced options concepts and techniques you have mastered and which areas need further attention and reinforcement, for which you will be taken directly to the lecture where this material can be reviewed.
*********** Course Summary ***********
1. Operational considerations when trading options
Understanding the importance of an options trading plan and how options expiration impacts it. Reviewing the impact of the exercise and assignment processes and how pin risk and dividend risk can have an impact on your trading.
2. Understanding options pricing
Application of the Delta-Gamma approximation formula along with quick formulas for at-the-money straddles and 20-delta strangles. Analysis of the differences in distribution between intrinsic and extrinsic values.
3. Introduction to the Black-Scholes option pricing model
Understanding the principles behind the Black-Scholes option pricing model and how it results in at-the-money delta not being exactly 50 as it is often assumed and also how delta and the probability of expiring in-the-money are different.
4. Volatility and its impact on option pricing
Impact of volatility skew and term structure in options strategies such as ratio spreads, delta-buster and calendar spreads. Also, how volatility impacts the price of options even when directionally wrong.
5. Put-Call Parity
Introduction to put-call parity and its applications such as synthetic positions, box spreads and the impact of hard-to-borrow status on option pricing.
6. Synthetic Positions
Applying put-call parity to positions such as covered calls, condors, butterflies and vertical spreads.
7. Advanced Option Greeks
Analyzing second and third order greeks (delta, vega, theta, gamma, vanna, charm, speed, zomma, color, vomma, veta, thega) and how they react to changes in underlying price, volatility and time to expiration.
8. Options Strategies
Review of premium-selling strategies by implied volatility level and directional outlook. Also, earnings-related calculations and strategies along with a review of stop-losses for a 0-DTE strategy.
9. How to trade the VIX
Trading the VIX using VIX Futures, VIX ETFs and ETNs and VIX Options. Impact of contango and backwardation on the pricing of VIX Products
10. VIX calculation and settlement of VIX Futures and Options
Understanding what VIX represents and how it's calculated. Impact of the settlement process on VIX Futures and VIX Options
11. Adjusting and rolling options positions
Introduction to the concept of managing existing options positions by adjusting or rolling them as a response to changing market conditions
12. Options Portfolio Management
Managing an Options Portfolio and all its components to maximize profits and minimize risks
13. Differences between current P/L and P/L at expiration for Options Strategies
Understand the interaction between underlying price, time to expiration and implied volatility when analyzing your options positions' payoff diagrams.
14. Top 10 Books on Options Trading
Top 10 books that will help you get started with option trading and later on become the best option trader you can be.
15. Trading the Wheel
Learn about the Wheel options strategy, what it is, when to put it on, its pros and cons and what you will need to start trading it.
*********** Course Summary ***********
Who this course is for:
- Anyone wanting to take control of their personal finances using advanced options strategies to achieve it
- Beginners in the Options Markets wanting to improve their options trading skills
- Anyone familiar with Financial Markets wanting to add advanced techniques in Options Trading to their portfolio
- Active market participants wanting to complement their financial activities with advanced Option Trading
- Option traders wanting to expand their knowledge about advanced Options Strategies and add new ones to their Portfolio
- Students of Finance, Business or similar programs wishing to complement their academic and theoretical knowledge with practical Option strategies traded in the market
Options expert with over 20 years of experience trading in several different markets and financial products with a passion for teaching basic to advanced options trading concepts and techniques in clear and simple terms.
My objective with this course is to help students acquire the necessary financial, mathematical and practical concepts to trade options efficiently and profitably. Students will also benefit with the expertise that comes with years of options trading experience along with thousands of trades in the options markets.