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The New Option Secret - Volatility: The Weapon of the Professional Trader and the Most Important Indicator in Option Trading
By: Caplan, David L.

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Item #: 2889
Pages: 310
Publisher: Marketplace Books
ISBN: 1883272335
Type: Book - Soft Cover
Publish Date : 3/1/2000
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Synopsis:
Discover how option volatility indicates market tops/bottoms, which strategy is to use, how it indicates whether options should be bought or sold & how it can be used to take advantage of premium "disparity" between option strike prices. You'll also learn to exploit option market inefficiencies and methods that help determine seasonal factors in volatility.

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Jacket Description:
Option master David Caplan reveals how option volatility . . .

- Accurately indicates market tops Ft bottoms
- Signals which option strategy is best to use
- Indicates whether options should be bought or sold
- Can be used to increase your probability of profit

Plus - discover high-powered strategies for...

- Exploiting option market inefficiencies

- Using neutral option strategies to trade like a "bookie"

- Recognizing and increasing returns by selling overvalued options,

- Using "special circumstances" and trading range markets to your advantage

- Benefiting from reliable seasonal tendencies in volatility

- Volatility charts of the futures' options markets, methods used most frequently by top options traders, common mistakes to avoid - and much more!

"For the first time an "insider" has revealed the "secret" of the professional option traders who well "overvalued" options to unsustpecting public traders."
-Ken rester, author of The Complete Option Player

"As a professional option trader, I found The Option Secret gave me new perspoectives on using 'over and undervalued options.' I only hope others DON'T read it - and get too smart!"
-Jon Najarian, option trader profiled in The Supertraders

"This book is long overdue. It should not be missed by anyone who trades futures or stocks."
-Chris Myers, president, Traders' Library

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Table of Contents:
TABLE OF CONTENTS

INTRODUCTION

SECTION I TRADING PLAN AND SPECIAL CIRCUMSTANCES
Chapter 1 Using Option Volatility to Take
Advantage of Trading Opportunities 1
Chapter 2 Step No. 1 - Formulating Your Option
Trading Plan 3
Chapter 3 Money Management when Trading
Options 7
Chapter 4 Using Special Circurnstances to
Improve Your Odds of Success In Trading 11
Chapter 5 Special Circumstances by way of
Option Skewing; What it is, Why it Exists, And
How to Use it 31

SECTION II USING VOLATILITY TO DETERMINE ACTUAL TRADING STRATEGIES
Chapter 6 Analyzing Your Option Trading
Opportunities 45
Chapter 7 How Option Volatility Determines
Which Option Strategy to Use 51
Chapter 8 Using The Neutral Option Trading
Strategy to Trade Like a "Bookie" 57
Chapter 9 Using "The Free Trade" to Construct
a Large Position 69
Chapter 10 "The Ratio Option Spread" - How it
Works; Why it's One of Our Favorite Trades 73
Chapter 11 Using "In-The-Money Options" to
Take Advantage of Option Price Disparities 79
Chapter 12 The "Calendar Spread 83
Chapter 13 "No Cost Option Strategy 85
Chapter 14 Monitoring Your Positions and Follow-
Up Strategies 87

SECTION III THE TECHNICAL MATERIAL
Chapter 15 An Options Overview 91
Chapter 16 Types of Volatility 95
Chapter 17 Technical Explanation Of The Use
Of Vega, Delta, And Theta 109

SECTION IV TRADING RULES AND ARTICLES
Chapter 18 Trading Gems and Tidbits 117
Chapter 19 Special Articles 129

SECTION V This section is comprised of the best articles and excerpts from books by experienced option traders on how they use option volatility

The Limits, Boundaries, and Seasonality of Implied Volatility in Agricultural Options, reprinted by permission of Christopher A. Bobin, John Wiley& Sons from "Agricultural Options -Trading, Risk Management, and Hedging,"1992,605 Third Avenue, New York, N.Y. 10158-0012 169

Learning the Basic Option Trading Strategies (and uses) to Solidify Objectives, reprinted by permission of Russell R. Wasendorf & Thomas A. McCafferty, "All About Options," From The Inside Out, @1993 Probus Publishing Company, 1925 N. Clybourn Avenue, Chicago IL 60614 177

Buying The Calm, reprinted by permission of Futures The magazine of commodities & options 1989 Issue, By George Tzakis, 1989 Oster Communications Inc., 219 Parkade, Cedar Falls, lowa 50613 185

The Compleat Option Player, reprinted by permission of Kenneth R. Trester from "The Compleat Option Player," published by the Institute for Options Research Inc. @1992, P.O. Boxe 6586, Lake Tahoe, NV 89449, (702) 588-3590 187

Strategy Decisions Based on Market Volatility, reprinted by permission of Larry McMillan from "The Option Strategist," published by the McMillan Analyst Corporation, P.O. Box 323, Morristown NJ, 07962, (800) 724-1817 199

Volatility, reprinted by permission of David L. Caplan 1992 from "The Options Advantage" Gaining a Trading Edge Over The Markets, published by Probus Publishing Company, 1925 N. Clybourn Avenue, Chicago IL 60614 223

Characteristics of Volatility Spreads, reprinted by permission of Sheldon Natenberg from "Option Volatility and Pricing Strategies - Advanced Trading Techniques for Professionals," published by Probus Publishing Company, 1925 N. Clybourn Avenue, Chicago IL 60614 229

Factors Affecting the Pricing of Options, reprinted by permission of Probus Publishing Frost from "Options On Futures," by Ronald Frost, @1989, published by Probus Publishing Company, 1925 N. Clybourn Avenue, Chicago IL 60614 231

Types of Volatility, reprinted by permission of Sheldon Natenberg from "The Chicago Merchantile Exchange Options Trading Seminar Workbook 237

The Best Strategy?, reprinted by permission of Lawrence G. McMillan from "OPTIONS AS A STRATEGIC INVESTMENT, 2nd Edition," copyright by New York Institute of Finance 239

Recent Opportunities, reprinted by permission of Len Yates from "OptionVue Newsletter," OptionVue Systems, 175 E. Hawthorn, Vernon Hills IL 60061, (708) 716-6620 245

Volatility - The Key To Option Pricing, from Financial Futures Professional, CBOT Marketing Dept 249

Exploiting Volatility for Maximum Gains, reprinted by permission of Len Yates from "OptionVue Newsletter" OptionVue Systems, 175 E. Hawthorn, Vernon Hills IL 60061 251

"Seasonal Option Volatility Trends in the Grain Markets," by Jeffrey Korzenik, reprinted by permission of Futures Magazine, Option Strategy, Oster Communications Inc., 219 Parkade, Cedar Falls, Iowa 50613 265

Volatility as a Trading Vehicle, by George Tzakis, reprinted by permission of Futures Magazine, Oster Communications Inc., 219 Parkade, Cedar Falls, Iowa 50613 267

Using Implied Volatility to Measure an Option's Value, by John C. Nelson, reprinted by permission of Futures Magazine, 1989 Oster Communications Inc., 219 Parkade, Cedar Falls, Iowa 50613 269

The Rules Of The Game, by Marc Clemons, reprinted by permission of OptionVue Systems (708) 816-6610 273

Some Random Thoughts on Option Trading, reprinted by permission of Larry McMillan from the "Option Strategist Newsletter", published by the McMillan Analyst Corporation, P.O. Box 1323, Morristown NJ, 07962, (800) 724-1817 275

Soybean Market Seasonal Volatility Spikes, from C&S Marketing 279

Using Probability of Profit and Gaming Theory in Trading, by David L. Caplan, from 'Trade Like a Bookie' Newsletter 1996 David L. Caplan, P.O. Box 5406 Oxnard, CA 93031, (805) 278-4350 283

Conclusion 287

APPENDIX A: Tables
Most Common Option Strategies For All
Markets 289
Hot to Calculate Approximate Options
Margins 289
Option Action Chart 290
Obtaining Fills on Option Orders 291
APPENDIX B: Charts Of Volatility Of Futures Options
OptionVue Systems 293
Corn 295
Soybeans 295
Cocoa 296
Crude Oil 296
Cotton 297
German Mark 297
Japanese Yen 298
Swiss Franc 298
Gold 299
Silver 299
Live Cattle 300
Copper 300
Sugar 301
Coffee 301
U. S. Treasury Bonds 302
S & P 500 302
Eurodollar 303
Orange Juice 303
Heating Oil 304
Wheat 304

Bibliography 305
Bibliography of Recommended Reading 307

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