How to Trade Options – Book Review – Sheldon Natenberg, Option Volatility and Pricing

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As with most books on the topic of how to trade options, the amount of material to get through can be daunting. For example, with Sheldon Natenberg’s Option Volatility and Pricing, it is about 418 pages to digest. There are adequate reader reviews on Amazon and Google Book Search, to help you decide if you will get the book. For those who have just started or are about to read the book, I’ve summarized the core concepts in the larger and essential chapters to help you get through them quicker. The number on the right of the title of the…

Options Trading Strategies – Wrong Use of Historical Volatility and Implied Volatility Crossovers

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Not all volatilities are constructed equal. It is critical to differentiate between Historical Volatility and Implied Volatility, so retail traders learn how to trade options focused on what is material to theoretically price option spreads forward. Historical Volatility (HV) measures past price movements of the underlying asset recording the asset’s actual or realized volatility. The more commonly known type of HV is Statistical Volatility, which computes the underlying assets return over a finite but adjustable number of days. Let me explain what “finite but adjustable” means. You can vary the number of days to measure the Statistical Volatility: for example,…

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