Description
The study of options and other derivative instruments can be an intimi- dating experience for a newcomer. Our objective in this book is to help introduce options in a straightforward but rigorous way.
Most of the enclosed material was taken from the educational program developed by the O'Connor Partnerships and Swiss Bank Corporation. In our training of professional traders, we believe we have developed an intuitive, practical approach to options.
The language we use is occasionally different from textbook lan- guage for good reason. Some textbooks talk about an option's "time value," combining several value components in a way that leaves many people confused. When we talk about the same ideas, we distinguish between an option's basis value and its volatility value to eliminate confusion. We dissect and examine the term "at the money," while most introductory discussions gloss over its possible interpretations.
We also debunk some option myths. One of the greatest of these myths is the misconception that option trading is a zero-sum market. We talk about the objectives and viewpoints of option traders relative to the objectives and viewpoints of investors and risk managers.
The perspectives, examples, and even the language we use have been very successful in educating trading personnel. We hope the insights developed in our classrooms will make options more understandable, accessible, and useful to a wider audience.
