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Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profit (Bloomberg Financial) Hardcover – July 1, 2008

by Dan Passarelli (Author), William J. Brodsky (Foreword)
4.3 4.3 out of 5 stars 36 ratings
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Veteran options trader Dan Passarelli explains a new methodology for option trading and valuation. With an introduction to option basics as well as chapters on all types of spreads, put-call parity and synthetic options, trading volatility and studying volatility charts, and advanced option trading, Trading Option Greeks holds pertinent new information on how more accurate pricing can drive profit.

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

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

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

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

Previous page
  1. Print length
    352 pages
  2. Language
    English
  3. Publisher
    Bloomberg Press
  4. Publication date
    July 1, 2008
  5. Dimensions
    6.5 x 1 x 9.5 inches
  6. ISBN-10
    157660246X
  7. ISBN-13
    978-1576602461
  8. See all details
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Editorial Reviews

Review

"A must-read for individuals who are serious about trading options" -- James Bittman, author, Trading Options as a Professional

"Dan's book is a primer for options aficionados. Without bogging you down with super-heavy math, he walks you through the key principles and shows you what matters the most to your trading portfolio." -- Fari Hamzei, founder, Hamzei Analytics, LLC

Review

"A must-read for individuals who are serious about trading options."
—James Bittman
Author, Trading Options as a Professional

"Dan's book is a primer for options aficionados. Without bogging you down with super-heavy math, he walks you through the key principles and shows you what matters the most to your trading portfolio."
—Fari Hamzei
Founder, Hamzei Analytics, LLC

Product details

  • Publisher ‏ : ‎ Bloomberg Press; 1st edition (July 1, 2008)
  • Language ‏ : ‎ English
  • Hardcover ‏ : ‎ 352 pages
  • ISBN-10 ‏ : ‎ 157660246X
  • ISBN-13 ‏ : ‎ 978-1576602461
  • Item Weight ‏ : ‎ 1.5 pounds
  • Dimensions ‏ : ‎ 6.5 x 1 x 9.5 inches
  • Customer Reviews:
    4.3 4.3 out of 5 stars 36 ratings

About the author

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Dan Passarelli

Dan Passarelli

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Full content visible, double tap to read brief content.

Dan Passarelli, is the author of the book Trading Option Greeks and founder of Market Taker Mentoring LLC. Market Taker Mentoring is an options education company that provides personalized one-on-one mentoring for option traders. The company website is www.MarketTaker.com.

Dan started his option trading career on the floor of the Chicago Board Options Exchange (CBOE) as an equity options market maker. He also traded agricultural options and futures on the floor of the Chicago Board of Trade (CBOT). In 2005, Dan joined CBOE's Options Institute and began teaching both basic and advanced option trading concepts to retail traders, brokers, institutional traders, financial planners and advisors, money managers, employees of the Federal Reserve Bank, and market makers. In addition to his work with CBOE, Dan taught option trading strategies at the Options Industry Council (OIC). Dan has written numerous articles in the financial press. Dan can be followed on Twitter at www.twitter.com/Dan_Passarelli.

Customer reviews

4.3 out of 5 stars
4.3 out of 5
36 global ratings

Top reviews from the United States

Peter J. Hewson
5.0 out of 5 stars Up there with the best: trading by the greeks
Reviewed in the United States on January 26, 2011
Verified Purchase
"In my top half dozen options books worth buying".

As a long-term trader (and presenter) of options I've read mostly all of the serious options books that would be used as teaching resources. Whilst Natenberg, McMillan, Hull et al are all good there is something particularly honest about this book in it's style: the humor with which the topics are presented. The author carefully explains the greeks over dozens of pages with excellent examples then goes back over the elements of an option's price when a particular strategy is used. He derives and explains the changes as the underlying changes. His description rivals the computer-generated pay-offs. Excellent!

For a while now I have run courses in advanced retail trading (no, that's not a contradiction) but in these elite courses I teach strategies without using the words 'Put' or 'Call'. I'll just use expressions like long delta etc. as, in the end, all options trades are an arrangement of the greeks. Once that is understood positions can be conceptionalised instantly and a trader's probability of success shyrockets. Ultimately this is where this book takes us.

This book is a good introduction to trading by understanding the greeks and, yes, the author uses strategies with puts and calls.

Incidentally buying a good book is, essentially, a low long delta position with very low theta. Gamma this one to your success. But beware: the IV will keep you awake at night thinking of strategies!
24 people found this helpful
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Malcolm Bird
4.0 out of 5 stars Trading Greeks
Reviewed in the United States on April 15, 2014
Verified Purchase
I need to read at least one more time before I could absorb all this book explains.
It gets into the nitty gritty of the components of the Black Scholes option pricing model.
It explains why each component is important and when, as well as, how, they affect each other.
Read this book with a white board handy because you will need to draw diagrams to fully understand it.
3 people found this helpful
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SkydivingNerd
5.0 out of 5 stars Uncommon Insights
Reviewed in the United States on May 16, 2011
Verified Purchase
This is not your average options book. You can tell it was written by a guy who did this for a living. The first few chapters are worth the price of the book alone.

It's the only book I've read that discusses when the time value (at what point during the day and week) time value comes out of an option.

We've all seen the time premium accelerating decay graph a million times. Did you know it's only valid for ATM options? This book is the only source (book, Webcast, seminar) that I've encountered that points this out. OTM options have a more linear time decay (page 41). Very valuable info for us sellers who were holding onto short positions for the expected big pay off during the week of expiration.

FYI, the author recently (5/2011) did a live educational Webcast on the CBOE's Web site on the greeks and adjusting iron condors that I found very informative. It should be in the CBOE Webcast archives (under the Education tab) by the time you read this.
11 people found this helpful
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Touma M. Elias
5.0 out of 5 stars Finally We have it ....
Reviewed in the United States on September 1, 2008
Verified Purchase
This is an excellent book on a topic that a lot of traders, have no deep understanding. It explains the Greeks in a layman and a trader language, and provides a clear view how to trade and profit using the information, given by these indicators. I like the examples given, especially those on Delta Neutral Trading, which other books hardly mention. Of special interest, was the clear perspective of Market Makers, and how they view trading from their end. This helps a lot, us retail traders,to place our orders in a more efficient way, for faster execution. My congratulations on this book, which was long due.
12 people found this helpful
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Elias M.
5.0 out of 5 stars Excellent Book on Options
Reviewed in the United States on October 12, 2011
Verified Purchase
This is an excellent book on options especially because of how easy it is to understand complex concepts. The chapter on option arbitrage made market maker style trades such as reversals/conversions, boxes and jelly rolls very clear. I also found the chapters that described how the greeks change on each strike when different variables change to be helpful. For example, if vols rise or fall, what happens to the out of the money, in the money and at the money vegas, deltas and gammas. For people looking to advance their options to the next level I highly recommend Trading Option Greeks.
3 people found this helpful
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Delpacho
4.0 out of 5 stars A good start
Reviewed in the United States on May 18, 2015
Verified Purchase
Good introduction to option trading, very easy to read.
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Christopher
5.0 out of 5 stars Perfect for getting to the next level
Reviewed in the United States on August 10, 2010
Verified Purchase
After starting to trade options I got burned on some bad decisions. Typical of starting out but what really killed me was not accounting for/understanding Theta. The "intro" book I read didn't cover this. Trading Option Greeks is perfect in that it's easy enough to follow but comprehensive enough to cover the Greeks...integral to options. Looking back I now see how option trading without understanding these concepts was foolish. This book covers some complex concepts which sometimes meant reading sections twice. This said, it's worth every penny. Just buy this book.
9 people found this helpful
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Aniruddha Pant
3.0 out of 5 stars Its alright
Reviewed in the United States on September 18, 2008
Verified Purchase
When I bought this book, I was expecting really in-depth analysis of various Greeks and their effects on basic option positions as well as complex spreads. However, I was bit disappointed.

If you have read any decent preliminary option trading books (Natenberg, McMillan et al) or if you have been trading option spreads for say 1+ year, this book would be useless. In aggregate there would be about 10-12 page material which may useful for such people. Last chapter on relationships between implied and realized volatility is OK.

For some reason the author has morbid fear for graphs of positions and greeks. He ends up giving tables after tables to illustrate effect of various greeks on option position.

If you are at a stage where you think I buy call option when I am bullish and I buy put option when I am bearish, this book will help you understand the effects of other equally important variables in pricing and trading, but then there are so many other which give this information in a better fashion in my opinion.
134 people found this helpful
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Top reviews from other countries

Ozgur G
4.0 out of 5 stars Good intuitive information on Option Greeks
Reviewed in the United Kingdom on August 12, 2011
Verified Purchase
This is a good book on Option Greeks. Book gives general intuitive information on Greeks and is light on Maths.
It would help if there were more graphs.
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