1nNew York Futures Exchange, 131New York Mercantile Exchange(NYMEX}, 2, 128New York Stock Exchange, 303, 343New York Times, 31nNewton-Raphson search, 446
e7O%OptionAmerican, 4, 44, 113, 120n, 148n,241
at-the-money, 7-8, 106, 110, 205,208-209
call, 1
European, 6, 44, 113, 204n, 213,239, 240, 242n
flex, 2n
in-the-money, 7-8, 111, 113, 205
out-of the-money, 7~8, 205
ona spread, 351-352
put, 1
replication, 94
serial, 2
type, 1468
value at expiration, 13-19Outliers, 401Out-of-the-money. See Option, out-of
the-moneyOverwrite, 261oPPacific Stock Exchange, 303Parity. See Value, intrinsicParkinson, Michael, 66nPhiladelphia Stock Exchange, 6n, 303Pin risk, 224-226Portfolio insurance, 94, 271Program. trading, 310Pseudo-American Call, 248Put-Call Parity, 216Premium, 6Present value, 222n, 447Price relative, 443Protective option, 258-260eR &
Random walk, 51-52Range forward, 264Ratio backspread. See BackspreadRatio spread, 141-142
bull and bear, 199-200Ratio vertical spread, 139-141, 145,
200, 452
intermarket, 339Ratio write, 266Reversal. See Reverse conversionReverse Conversion, 217-219, 456Riskless hedge, 45Rho, 116-118, 180Roll. See Jelly rollRoss, Stephen, 248, 400n, 434nRubenstein, Mark, 248, 434n
%,& S &
Scalping, 127
Scholes, Myron, 43, 431nSchroeder, Mark, 400nScott, Louis D., 393n
Index
Settlementcash, 226, 305, 314futures-type, 10-11, 220of stock index contracts, 315nprices, 406ntisk, 226-228stock-type, 10-11, 220Short, 11-12Short premium, 160Short sale, 93, 156-157, 386Short squeeze, 157Skewness, 402-403, 440-441, 443Splitprice conversion and reversal, 264Spread, 127-129crack, 335-336intermarket, 331intramearket, 128, 331long and short, 147entering an order. 169-171NOB, 129Standard deviation, 56-58, 59, 60-61,381, 440-443daily and weekly, 65-66sample, 440nStock split, 46nStraddle, 141-142, 187, 236, 398-399,452Strangle, 143-144, 187, 452Strike price. See Exercise priceSynthetics, 213-214, 456in futures option markets, 220-221in stock option markets, 221-223in stock index markets, 320-322using in volatility spreads, 233-235Synthetic market, 216, 457% TTaxes, 87, 386Tender offer, 156, 254Theta, 111, 113, 361-362characteristics, 119dollar ($theta}, 114n, 346implied, 120of volatility spreads, 160-161Index
risk, 179, 353Three-way, 229Time box, 233Time decay. See ThetaTime premium. See Value, timeTime spread, 148-154, 237, 452, 458bull and bear, 201effect of dividends, 155effect of interest rates, 154-155effect of price change, 150-151effect of time passage, 149-150effect of volatility, 151-153, 168in hedging strategies, 267in futures option markets, 153-154Transaction costs, 87, 181, 387Tunnel, 264
& U &Underlying, 1-4, 45Up-tick, 93
eVValue
extrinsic. See Value, timeintrinsic, 6-7, 13of an underlying contract, 84ntime, 6-7, 261theoretical, 37~38, 40Variation, 11, 387nVega, 113-115, 361-362dollar (Svega), 114n, 347effect of time passage, 115characteristics, 119-120implied, 120of volatility spreads, 160-161, 166tisk, 179-180, 353
Vertical spread, 202-211, 235-236, 252
in hedging strategies, 267
importance of implied volatility, 208
Volatility, 45, 49, 390-393, 399-400and observed price changes, 67~68as a standard deviation, 60-61calculation of historical, 443-446calculation of implied, 446
469
cone, 275effect of changes. See Vegaforecast, 70-71future, 69historical, 69-70, 71implied, 72-74, 89, 166, 177, 208,266, 355implied versus historical, 290-295implied versus future, 295-299mean reverting, 275of interest rate products, 68-69, 393realized, 70relationships, 342-345seasonal, 76serial correlation, 280skew, 407stochastic, 393trends, 275Volume Investors, 105
% W BoWall Street Journal, The, 31nWhaley, Robert, 248, 438nWhite, Alan, 393nWiggins, J.B., 393nWilcox, Darrell, 352, 434<|end|>