Timothy Falcon Crack – Basic Black-Scholes Option Pricing and Trading

THE AUTHOR: Dr. Crack studied PhD-MIT offers level pricing and Harvard Business School, Undergraduate and MBA option pricing at Indiana University (winner of many teaching awards), was an independent consultant for the New York Stock Exchange, and worked in London as an asset management practitioner. and Over 15 years, he has been trading options. This unique combination of teaching, consulting, and practice is unparalleled. and Every page contains information about trading. SUMMARY: This is the third edition. Basic Black-Scholes provides very clear explanations about Black-Scholes option pricing theory and The theory of option trading is discussed in detail. The presentation doesn’t go beyond basic Black-Scholes are for three reasons. First, a beginner need not go beyond Black.-Scholes to make money on the options markets; Second all high-Black is simply an extension to level option pricing theory.-Scholes; and Third, many books exist that go beyond Black.-Without first laying the solid foundation, Scholes cannot be made.

Trading advice is not beyond the elementary call and Because more complicated trades simply combine these, you can put positions. WHAT IS UNIQUE OR SPECIAL ABOUT THIS BOOK?It provides the fundamental intuition that you need to trade options first time or interview for an option job. Honest advice on trading: There is no way to beat the market, but this advice can make you more money if you have the skill. and This advice is useful if you don’t have any trading skills but still want to trade. -Full immersion treatment for transaction costs (T-costs). -Lessons learned from trading explained in simple terms -Simplified facts about the markets (e.g. profiting from reversals and when are T).-The trading day can have a significant impact on corporate control and costs. How to apply (European).-Style) Black-Scholes Pricing to the Trading of (American)-style) options. -Leverage through margin trading is less than leverage through options. -Black-Scholes option pricing code: HP17B, HP19B and HP12C. -Two downloadable spreadsheets. The first lets you forecast T-Costs for option positions with simple models The second lets you explore options sensitivities, including those of the Greeks. -Practitioner Bloomberg Terminal screenshots for learning.

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-Simple discussion about continuously-compounded returns -Introduction “paratrading” Side by side: Trading stocks-By-Side with additional options to generate additional profits -Unique “regrets” Early exercise decisions are treated and Trade-American Discounts-Style is important and puts. Puts.-Call parity and option pricing. How to calculate Black-You can get Scholes in your brain in 10 seconds (also available in Heard on The Street Quantitative Question from Wall Street Job Interviews). -Special attention paid to arithmetic Brownian Motion with general pricing formulae and Comparisons to Bachelier (1900). and Black-Scholes. Attention to the effect of dividends on American option pricing. -Dimensional analysis and The adequation formula (relating FX) and FX prices Black through Transformed Black-Scholes formulae). -Intuitive evaluation of risk-neutral pricing/probabilities and How and why these are related to physical pricing/probabilities. Careful distinction between early Merton (non-Merton) and the Merton.-Risistance-neutral) hedging-Type argument and Cox later-Ross/Harrison-Kreps risk-Neutral pricing – Simple discussion about Monte-The Carlo method in science and option pricing. Black: Simple interpretations-Scholes formula and PDE and Trading implications Black conditional probabilities should be discussed with care.-Scholes. Scholes.-level topics e.g., bond-numeraire interpretations of Black-Scholes (where N(d2) is P*(ITM)) versus the stock-numeraire interpretation (where N(d1) is P**(ITM)).