International Journal of Financial Management

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

On Volatility Trading & Option Greeks


Affiliations
1 Department of Management Studies, Indian Institute of Technology, Roorkee, Utarakhand, India
     

   Subscribe/Renew Journal


Commensurate with this exponential growth in the depth and breadth of derivative markets and the range of financial products traded therein, there needs to be developed a comprehensive mathematical framework to support the, hitherto, empirically established features of trading strategies involving these instruments. It is the objective of this article, to provide a mathematical backup for the various properties of 'volatility trading' strategy using call options. Additionally, an attempt is made to elucidate the implications of behavior of various 'option Greeks' on volatility trading.

Keywords

Financial Derivatives, Trading Strategies, Option Greeks, Black Scholes Model, Volatility Trading.
Subscription Login to verify subscription
User
Notifications
Font Size

  • Bates, D. S. (1991). The crash of ‘87: Was it expected? The evidence from options markets. Journal of Finance, 46(3), 1009-1044.

  • Black, F. (1976). The pricing of commodity contracts. Journal of Financial Economics, 3, 167-179.

  • Black, F., & Scholes, M. (1973). The pricing of options and corporate liabilities. Journal of Political Economy, 81, 637-654.

  • Haug, E. G. (1997). The complete guide to option pricing formulas. McGraw-Hill, New York.

  • Hull, J. (2012). Option, futures, and other derivatives (8th Ed.). Pearson Edication.

  • Jarrow, R., & Rudd, A. (1983). Option pricing. Irwin.

  • McDonald, R. L. (2002). Derivatives markets. Addison Wesley.

  • Merton, R. C. (1971). Optimum consumption and portfolio rules in a continuous-time model. Journal of Economic Theory, 3, 373-413.

  • Merton, R. C. (1973). Theory of rational option pricing. Bell Journal of Economics and Management Science, 4, 141-183.

  • Taleb, N. (1997). Dynamic hedging. Wiley.

  • Webb, A. (1999). The sensitivity of vega. Derivatives Strategy. Retrieved from http://www.derivativesstrategy.com/magazine/archive/1999/1199fea1.asp, November, 16-19.

  • Wilmott, P. (2000). Quantitative finance. Wiley.


Abstract Views: 227

PDF Views: 2




  • On Volatility Trading & Option Greeks

Abstract Views: 227  |  PDF Views: 2

Authors

J. P. Singh
Department of Management Studies, Indian Institute of Technology, Roorkee, Utarakhand, India

Abstract


Commensurate with this exponential growth in the depth and breadth of derivative markets and the range of financial products traded therein, there needs to be developed a comprehensive mathematical framework to support the, hitherto, empirically established features of trading strategies involving these instruments. It is the objective of this article, to provide a mathematical backup for the various properties of 'volatility trading' strategy using call options. Additionally, an attempt is made to elucidate the implications of behavior of various 'option Greeks' on volatility trading.

Keywords


Financial Derivatives, Trading Strategies, Option Greeks, Black Scholes Model, Volatility Trading.

References