Positional Option Trading. Euan Sinclair

      1 Chapter 1FIGURE 1.1 The implied volatility surface for SPY on September 10, 2019.FIGURE 1.2 The terminal PL distribution of a single short one-year ATM strad...FIGURE 1.3 The terminal PL distribution of a single one-year ATM straddle th...FIGURE 1.4 The standard deviation of the terminal PL distribution of a singl...

      2 Chapter 3FIGURE 3.1 The rolling 30-day close-to-close volatility of Maximus, Inc.FIGURE 3.2 Term structure of forecast volatility for SPY using GARCH(1,1) (s...

      3 Chapter 4FIGURE 4.1 Profit from selling 1 front-month VIX future.FIGURE 4.2 The VIX index from June 2015 to October 2019.FIGURE 4.3 Profit from selling 1 front-month VIX future when the term struct...FIGURE 4.4 The VIX and the subsequent 30-day realized S&P 500 volatility.FIGURE 4.5 The S&P 500 variance premium (VIX minus realized volatility).FIGURE 4.6 The S&P 500 variance premium distribution.FIGURE 4.7 Performance of the CNDR index.FIGURE 4.8 Performance of the BFLY index.FIGURE 4.9 The three different positive return paths.FIGURE 4.10 The three different negative return paths.FIGURE 4.11 The P/L for a short put, with a stock jump at expiration.FIGURE 4.12 The P/L for a long call, with a stock jump at expiration,

      4 Chapter 5FIGURE 5.1 Results of the long straddle strategy.FIGURE 5.2 Results of the short straddle strategy.

      5 Chapter 6FIGURE 6.1 The profit distribution of the short straddle.FIGURE 6.2 The profits of the short strangle.FIGURE 6.3 The returns of the short straddle when our forecast was poor.FIGURE 6.4 The returns of the short strangle when our forecast was poor.FIGURE 6.5 The returns of the short 100 straddle when the underlying has the...FIGURE 6.6 The returns of the short 85/134 strangle (10-delta call and put) ...FIGURE 6.7 The returns of the short straddle when hedging daily.FIGURE 6.8 The returns of the short 70/130 strangle when hedging dailyFIGURE 6.9 Vega as a function of underlying price for the straddle (solid li...FIGURE 6.10 The profit distribution of the fairly priced butterfly (long the...FIGURE 6.11 The profit distribution of the fairly priced condor (long the 70...FIGURE 6.12 The profit distribution of the poorly priced butterfly (long the...FIGURE 6.13 The profit distribution of the poorly priced condor (long the 70...FIGURE 6.14 The P/L of the straddle spread at expiry of the front-month opti...FIGURE 6.15 The profit distribution of a strangle with an implied volatility...

      6 Chapter 7FIGURE 7.1 Probability of the 3-month 150 strike call expiring in the money....FIGURE 7.2 Probability of the 3-month calls expiring in the money when the r...FIGURE 7.3 Ninetieth percentile of the profit of the 3-month 100-strike call...

      7 Chapter 8FIGURE 8.1 The PL distribution for 100 shares of a $100 stock with a 20% ret...FIGURE 8.2 The PL distribution for a 1-year ATM call option on a $100 stock ...FIGURE 8.3 The PL distribution for a 1-year ATM/20-delta call spread on a $1...FIGURE 8.4 The PL distribution for a short 1-year ATM put option on a $100 s...FIGURE 8.5 The payoff of the covered call as a function of stock price at ex...FIGURE 8.6 The performance of the CBOE BuyWrite Index compared to that of th...FIGURE 8.7 The total profit of the covered call and how much comes from equi...FIGURE 8.8 The PL distribution for a short 1-year ATM/20-delta put spread on...FIGURE 8.9 The PL distribution for a 1-year 20-delta risk reversal on a $100...FIGURE 8.10 The PL distribution for a 1-year ATM/20-delta risk one-by-two ca...

      8 Chapter 9FIGURE 9.1 Growth rate as a function of f (p1=0.55,p2=0.45,W1=1, ...FIGURE 9.2 Growth rate as a function of f (P1 = 0.55, P2 = 0.44, P3 = 0.01, ...FIGURE 9.3 The optimal investment fraction as a function of skewness (return...FIGURE 9.4 The approximate investment fraction as a function of skewness (re...FIGURE 9.5 The distribution of the option trade results.FIGURE 9.6 The dependence of growth rate on the fractional Kelly ratio.FIGURE 9.7 The growth rate to drawdown ratio as a function of the scaling fa...FIGURE 9.8 The probability of reaching 200% before being stopped out at 0% w...FIGURE 9.9 The expected time to reach 200% before being stopped out at 50% w...FIGURE 9.10 The return distribution of our trading strategy.FIGURE 9.11 The hoped-for distribution when a stop has been added.FIGURE 9.12 The true distribution when a stop has been added.FIGURE 9.13 The return distribution of the simulated trade when using a trai...FIGURE 9.14 The distribution of the final account after 10,000 simulations o...FIGURE 9.15 The distribution of the final account after 10,000 simulations o...FIGURE 9.16 The distribution of the final account after 10,000 simulations o...

      9 Chapter 10FIGURE 10.1 The price of Bitcoin in USD in 2018.

      10 Appendix 1FIGURE A1.1 The daily VIX changes from 2000 to 2018.FIGURE A1.2 The daily 1-year rate changes from 2000 to 2018.FIGURE A1.3 The standard deviation pf the P/L for an option hedged with an i...FIGURE A1.4 S&P 500 30-day volatility from January 2000 through to the end o...

      1  Cover

      2 Table of Contents

      3  Begin Reading

      1  ii

      2  iii

      3  iv

      4  xi

      5  xii

      6 xiii

      7  xiv

      8  xv

      9  1

      10  2

      11  3

      12  4