Book description
In
Volatility Trading
, Sinclair offers you a quantitative model for measuring volatility in
order to gain an edge in your everyday option trading endeavors. With an
accessible, straightforward approach. He guides traders through the
basics of option pricing, volatility measurement, hedging, money
management, and trade evaluation. In addition, Sinclair explains the
often-overlooked psychological aspects of trading, revealing both how
behavioral psychology can create market conditions traders can take
advantage of-and how it can lead them astray. Psychological biases, he
asserts, are probably the drivers behind most sources of edge available
to a volatility trader.
Your goal, Sinclair explains, must be clearly defined and easily
expressed-if you cannot explain it in one sentence, you probably aren't
completely clear about what it is. The same applies to your statistical
edge. If you do not know exactly what your edge is, you shouldn't trade.
He shows how, in addition to the numerical evaluation of a potential
trade, you should be able to identify and evaluate the reason why
implied volatility is priced where it is, that is, why an edge exists.
This means it is also necessary to be on top of recent news stories,
sector trends, and behavioral psychology. Finally, Sinclair underscores
why trades need to be sized correctly, which means that each trade is
evaluated according to its projected return and risk in the overall
context of your goals.
As the author concludes, while we also need to pay attention to
seemingly mundane things like having good execution software, a
comfortable office, and getting enough sleep, it is knowledge that is
the ultimate source of edge. So, all else being equal, the trader with
the greater knowledge will be the more successful. This book, and its
companion CD-ROM, will provide that knowledge. The CD-ROM includes
spreadsheets designed to help you forecast volatility and evaluate
trades together with simulation engines. Euan Sinclair
is an option trader with over ten years of experience trading options
professionally. He specializes in the design and implementation of
quantitative trading strategies. Sinclair is currently a proprietary
option trader for Bluefin Trading, where he trades based on quantitative
models of his own design. He holds a PhD in theoretical physics from the
University of Bristol.
