Years worth of option education in under 90 minutes

✔️✔️Watch over my shoulder to see how many things you can learn about options. Modeling a vol curve ✔️Computing a forward ✔️Specifying a vol curve with standard deviation gridpoints ✔️Computing the gridpoints ✔️Inputting skew parameters at the points to fit the market ✔️Using Excel’s linest function to get the coefficients of an n-order polynomial ✔️Using the curve to estimate IV for any strike Option valuation ✔️Implementing Black Scholes for European-exercise style options ✔️Includes greeks and N(d1) and N(d2) ✔️Numerical methods for estimating gamma and theta Interpreting skew ✔️How large skew values lead to counterintuitive probabilities as the implied distribution balances probability with magnitude ✔️Using vertical spreads to see the implied distribution ✔️Changing skew parameters to watch the spread prices change and the distribution shift ✔️How skew “corrects” the Black Scholes distribution to match empirical distributions ✔️Comparing implied distributions to “flat sheet” distributions Understanding vol changes day over day ✔️The difference between fixed strike and “floating” strike vol changes ✔️How fixed strike vols change arise from the interaction of spot moves and skew parameters change ✔️Why fixed strike vol changes drive your p/l Dissection ✔️How market makers actually use classic option structures and synthetic relationships ✔️Option traders “chunk” their positions to understand them just as seasoned chess players don’t see random configurations of pieces but see “mini-themes” that they understand deeply. For option traders these themes are structures like butterflies and condors ✔️How market makers “take structures out of the position” to minimize hedging costs Decomposing vol p/l from greeks ✔️Learn how to use your gamma and theta to estimate the realized vol portion of your p/l ✔️Learn how to use your vega to estimate the implied vol portion of your p/l ✔️See how delta p/l comes form options and share positions ✔️Understand how the tug-of-war between gamma and theta relates to the stock’s move on the day Uncategorized ✔️Pulling market data into Excel ✔️why the late 90s tech bubble was not irrational and how option markets understood that ✔️bubble distributions from the lens of the option market ✔️Put-call parity ✔️An intuitive way to estimate gamma p/l from middle school physics math: delta = velocity, gamma = acceleration, price change = time passage, and distance = p/l ✔️This shows why p/l is a function of the stock move squared