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Synopsis

Veteran options trader Dan Passarelli explains a new methodologyfor option trading and valuation. With an introduction to optionbasics as well as chapters on all types of spreads, put-call parityand synthetic options, trading volatility and studying volatilitycharts, and advanced option trading, Trading Option Greeksholds pertinent new information on how more accurate pricing candrive profit.

Most options traders focus on strategies such as covered calls,vertical spreads, butterflies and condors, and so on. But tradersoften don't know how to use the "greeks"—the five factorsthat influence an option's price—to trade moreeffectively.

The "greeks" (Delta, Gamma, Theta, Vega, Rho) are tools tomeasure minute changes in an option's price based on correspondingchanges in:

  • Interest rates
  • Time to expiration
  • Price changes in the underlying security
  • Volatility
  • Dividends

Using the greeks can lead to more accurate pricing informationthat will alert an option trader to mispriced derivatives that canbe exploited for profit. In straightforward language and making useof charts and examples, Passarelli explains how to use the greeksto be a better options trader.

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