Vertical Option Spreads, + Website: A Study of the 1.8 Standard Deviation Inflection Point
Modern financial markets are traded by talented individuals as well as large institutions with substantial resources. So if you're serious about making money in this arena, you need to find some sort of edge. Nobody understands this better than coauthors Charles Conrick IV and Scott Hanson. Both are experienced options traders who have worked in senior positions in finance and accounting, and are currently university professors in the field of finance.In 2009, they set out to find a realistic trading edge and began researching a way to marry the concept of probability under finite time conditions to a rationally measured return. The introduction of the new weekly options issued by the CBOE in June 2010 provided the ideal vehicle for their concept.Now, inVertical Option Spreads: A Study of the 1.8 Standard Deviation Inflection Point,they share their hard-won knowledge with you and detail a rational system that combines the concept of probability with options trading to help maximize your return on capital risked. Opening with an informative discussion of the journey that led the authors to the "1.8 Standard Deviation Solution," this reliable resource quickly moves on to evaluate different trading platforms, ranging from their chosen spread trading platform, eOption, to more sophisticated ones. From there, it explains spreads—including the vertical spread, which is the workhorse of the 1.8 SD strategy—and iron condors, and provides a brief summary of the "Greeks."The authors also take the time to review important elements of probability theory as well as Modern Portfolio theory to provide the proper grounding required for the assumptions of the 1.8 Standard Deviation Solution. With that information in hand, you'll be introduced to this powerful trading approach, where the vagaries of the market can be estimated under a very small margin of error and the probability of finding winning trades can be more effectively calculated. Along the way, you'll become familiar with Oracle's Crystal Ball (CB), and how it can be used to assess probabilities on various credit spreads using the Trading Spreadsheet (TS) provided in this book. It also expands on the use of CB with the TS on a number of different option positions.A companion website has also been developed in conjunction with this book. It contains more examples of the probability calculations that the authors work with, some background information, and items related to weekly options trading.No one can guarantee your trading success, but there are ways to put the odds in your favor. LetVertical Option Spreadsshow you how.