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| Acknowledgments | |
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| Introduction | |
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| Understanding the Relationship between Market Turbulence and Option Volatility | |
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| Managing Risk and Uncertainty with Options | |
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| What Is Risk? | |
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| What Is Uncertainty? | |
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| Seven Lessons Learned from Market Volatility | |
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| Understanding Derivatives | |
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| The Six Benefi ts of Options | |
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| Making Sense of Volatility in Options Trading | |
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| Volatility as an Asset Class | |
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| Analyzing Volatility with Implied Volatility | |
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| What Does Implied Volatility Reveal? | |
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| Making Trading Decisions Based on the Disparity between Historical and Implied Volatility | |
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| Appreciating Volatility for All It Is Worth | |
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| How Volatility Really Works on the Trading Floor | |
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| Volatility and Uncertainty: Lessons for the Irrational Option Trader | |
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| Varieties of Option Volatility Trading | |
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| Working with Volatility to Make Investment Decisions | |
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| On Predicting the Future | |
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| Starting with Historical Volatility | |
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| Implied Volatility | |
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| Why Do Volatilities Increase as Equities Fall? | |
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| Implied Versus Historical Volatility | |
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| Justifi cation for the Disparity Between Historical and Implied Volatility | |
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| Volatility Skew: Smile or Smirk? | |
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| Considering Some Examples | |
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| A Primer on Random Walk and Normal Distribution | |
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| Dealing with the Higher Moments of the Normal Distribution | |
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| Skew Is High, Skew Is Low. So What? | |
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| Does a "Flat" or "Steep" Skew Predict the Future? | |
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| A Fair Warning About Thinking About Skew Too Much | |
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| Understanding Option Volatility and its Relationship to Option Greeks, Personal Decision Making, and Odds Creation | |
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| Extreme Volatility and Option Delta | |
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| The Misnomer of Delta and Probability of Exercise | |
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| Delta Defi ned | |
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| The Relationship Between Volatility and Delta | |
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| Higher Volatility and Delta | |
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| Lower Volatility and Delta | |
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| Delta, Time, and Volatility | |
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| Delta, Position Delta, Volatility, and the Professional Trader | |
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| Smoke and Mirrors: Managing Gamma through Volatile Markets | |
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| Gamma and Volatility | |
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| Managing Positive Gamma during a High-Volatility Environment | |
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| The Bad News: There's Always More than Meets the Eye | |
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| Practical Considerations for Managing Long Gamma in a High-Volatility Environment | |
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| Managing Negative Gamma in a High-Volatility Environment | |
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| Practical Considerations of Negative Gamma in High Volatility | |
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| Gamma and Volatility with Respect to Time Structure | |
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| Summary | |
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| Price Explosion: Volatility and Option Vega | |
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| The Relationship between Implied Volatility and Vega | |
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| Implied Volatility: Price Analogy | |
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| Option Vega and Time | |
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| Option Vega and Its Greek Cousins | |
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| Option Vega Implications | |
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| Don't Underestimate the Relationship between Volatility and Option Vega | |
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| Volatility and Vega Insensitivity | |
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| Important Concepts When Applying Option Vega in a Volatile Marketplace | |
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| Summary | |
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| Sand in the Hourglass: Volatility and Option Theta | |
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| Balancing Time Decay with Volatility: Mistakes Traders Make | |
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| Volatility and Theta: What Every Investor Needs to Know | |
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| Ten Proven Strategies to Employ in Uncertain Times | |
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| Preparing for Trading Using Volatility Strategies | |
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| The Elements of a Sound Trading Decision | |
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| Developing an Approach to Options Trading | |
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| The Mind of a Successful Trader | |
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| Decision Making, Options versus Everything Else | |
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| The Buy-Write, or the Covered Call | |
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| The Buy-Write (Covered Call) Defi ned | |
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| An Example of the Covered Call Strategy | |
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| The Theory and Reality of the Covered Call | |
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| Covered Call Writing and Implied Volatility | |
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| Implied Volatility in Practice | |
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| Managing Contracts in a Time of High Volatility or a Falling Market | |
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| Effective Call Writing in a Volatile Market | |
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| Covering the Naked Put | |
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| Contemplating the Cash-Secured Put | |
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| Utilizing the Cash-Secured Put in a High-Volatility Environment | |
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| Cash-Secured Put and Volatility: Risks and Consequences | |
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| Income Strategy: Volatility as an Asset Class and Cash-Secured Puts | |
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| Position Management | |
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| The Married Put: Protecting Your Profit | |
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| Volatility, Downside Risk, and the Case for Portfolio Insurance | |
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| Why Buy High Volatility? | |
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| The Married Put | |
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| How and When to Use a Married Put | |
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| Example of When to Use a Married Put | |
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| The Married Put: Limiting Loss, Neutralizing Volatility, and Unleashing Upside Potential | |
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| Married Put: A Real-Life Illustration | |
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| The Collar: Sleep at Night | |
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| Collar Strategy | |
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| Types of Collars | |
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| Summary | |
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| Conclusions on the Collar Strategy | |
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| The Straddle and Strangle: The Risks and Rewards of Volatility-Sensitive Strategies | |
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| The Buying or Selling of Premium | |
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| Properties of Straddles and Strangles | |
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| Comparing Straddles and Strangles | |
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| How to Compare Historical and Implied Volatility | |
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| The Impact of Correlation and Implied Volatility Skew | |
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| An Alternative to the Naked Volatility Sale via the Straddle/Strangle: The Strangle Swap | |
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| The Vertical Spread and Volatility | |
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| Introduction to the Vertical Spread | |
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| A Trader's Reasoning for Trading a Vertical Spread | |
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| Designing Your Vertical Spread | |
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| Vertical Spreads and Greek Exposure | |
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| Vertical Spreads as a Pure Volatility Play | |
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| Comparing Volatility's Effect on Vertical Spreads | |
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| Summary: Comparing Vertical Spreads and Implied Volatility | |
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| Calendar Spreads: Trading Theta and Vega | |
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| Calendar Spreading-Trading Time | |
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| Risks and Rewards of the Calendar Spread | |
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| A Calendar Spread with a Bullish Expectation | |
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| Considerations and Observations for Calendar Spreads and Volatility | |
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| Ratio Spreading: Trading Objectives Tailor Made | |
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| How Back Spreads and Ratio Spreads Work | |
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| Back Spreads | |
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| Ratio Spreads | |
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| Greek Values and the Back Spread or Ratio Spread | |
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| Configuring and Pricing a Back Spread or Ratio Spread | |
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| Reconciling Volatility and the Back Spread or Ratio Spread | |
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| The Butterfly Spread | |
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| Setting up a Butterfly | |
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| The Butterfly Spread as a Volatility Investment | |
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| Greek Values and the Butterfly | |
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| Structuring and Pricing a Butterfly | |
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| Trading Butterfl ies in a Volatile Market | |
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| The Iron Butterfly and the Condor | |
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| The Iron Butterfly | |
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| The Condor | |
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| The Iron Butterfl y, the Condor, and a Volatile Marketplace | |
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| Index | |