Trading Options at Expiration: Strategies and Models for Winning the Endgame (Kindle Edition)

by Jeff Augen (Author)

Editorial Reviews

Product Description

This is the eBook version of the printed book. If the print book includes a CD-ROM, this content is not included within the eBook version.

 

Equity and index options expire on the third Friday of each month. As that moment approaches, unusual market forces create option price distortions, rarely understood by most investors. These distortions give rise to outstanding trading opportunities with enormous profit potential. In Trading Options at Expiration, leading options trader Jeff Augen explores this extraordinary opportunity with never-before published statistical models, minute-by-minute pricing analysis, and optimized trading strategies that regularly deliver returns of 40%-300% per trade.

 

You’ll learn how to structure positions that profit from end-of-contract price distortions with remarkably low risk. These strategies don’t rely on your ability to pick stocks or predict market direction and they only require one or two days of market exposure per month.

 

If you’re looking for an innovative new way to reignite your returns no matter where the markets move, you’ve found it in Trading Options at Expiration.

 

• Why traditional option pricing calculations always break down in the final days before expiration
  Three powerful end-of-cycle effects not comprehended by contemporary pricing models
•  Reducing your risk by reducing your market exposure
  Trading only one or two days each month and avoiding overnight exposure
• Structuring trades that reflect true expiration-day behavior
  Leveraging the surprising power of expiration-day pricing dynamics

From the Back Cover

Equity and index options expire on the third Friday of each month. As that moment approaches, unusual market forces create option price distortions, rarely understood by most investors. These distortions give rise to outstanding trading opportunities with enormous profit potential. In Trading Options at Expiration, leading options trader Jeff Augen explores this extraordinary opportunity with never-before published statistical models, minute-by-minute pricing analysis, and optimized trading strategies that regularly deliver returns of 40%--300% per trade.

 

You’ll learn how to structure positions that profit from end-of-contract price distortions with remarkably low risk. These strategies don’t rely on your ability to pick stocks or predict market direction and they only require one or two days of market exposure per month.

 

If you’re looking for an innovative new way to reignite your returns no matter where the markets move, you’ve found it in Trading Options at Expiration.

 

• Why traditional option pricing calculations always break down in the final days before expiration
  Three powerful end-of-cycle effects not comprehended by contemporary pricing models
• Reducing your risk by reducing your market exposure
  Trading only one or two days each month and avoiding overnight exposure
• Structuring trades that reflect true expiration-day behavior
  Leveraging the surprising power of expiration-day pricing dynamics

 

Capture Enormous Profits from End-of-Contract Options Trading!

•  How to profit from option price distortions that occur near expiration
• New strategies that can return as much as 300% per trade!
• Direction-neutral techniques that reduce risk and limit market exposure

 

In the final days and hours before option contracts expire, their behavior veers wildly away from the predictions of standard pricing models. These last-minute price distortions offer immense profit opportunities to those who can recognize and trade them. In this book, Jeff Augen illumintes these opportunities with new statistical models, minute-by-minute pricing analysis, and optimized trading strategies. You’ll learn to exploit expiration pricing forces to structure trades that return from 40%--300% while limiting market exposure to just one or two days each month. Unlike other trading strategies that offer large profits in exchange for increased risk, expiration trading reduces risk by limiting market exposure to just two trading sessions per month.

 

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Product Details

• Format: Kindle Edition
• File Size: 2228 KB
• Print Length: 176 pages
• Simultaneous Device Usage: Up to 5 simultaneous devices, per publisher limits
• Publisher: FT Press; 1 edition (March 3, 2009)
• Sold by: Amazon Digital Services
• Language: English
• ASIN: B001UID8MI
• Average Customer Review: 3.8 out of 5 stars  See all reviews (8 customer reviews)
• Amazon.com Sales Rank: #26,387 in Kindle Store (See Bestsellers in Kindle Store)

  Popular in these categories: (What's this?)

  #13 in	Kindle Store > Kindle Books > Business & Investing > Investing > Options
  #67 in	Books > Business & Investing > Investing > Commodities

Customer Reviews

Most Helpful Customer Reviews

66 of 70 people found the following review helpful:

5.0 out of 5 stars Read this book before next expiration day!, March 19, 2009

By	Michael Benklifa (Dallas, Tx) - See all my reviews (REAL NAME)

This review is from: Trading Options at Expiration: Strategies and Models for Winning the Endgame (Hardcover)

I'm an options trader. That's how I make my living. I've read all the books, been to the seminars, and have the scars from experience. So believe me when I say this book is different. It's not the same options books with a different cover. It's not going to start all over from scratch about what are options. This little book is packed with an out-of-the box winning strategy that takes advantage of the institutional moves (for once!). The pinning of stocks on expiration day is a phenomena that has been noted for some time. How to make money from this is not so clear. Mr. Augen takes advantage of institutional trading behavior on expiration day and details not only which stocks to trade but which strategy and what time of day to apply each strategy. [read this last sentence again] This approach is not conjecture but a statistical study as to how certain stocks move. This is a genuine money making strategy that can earn 200%-300% or more in a few hours. Just recently a straddle purchased on a stock mentioned in the book could have been purchased for $1 and sold for $6 a few hours later. The beautiful thing is that institutions can't even take advantage of this strategy!

My previous favorite book on options was Mr. Augen's Volatility Edge which, again, is in a class by itself. His next book was the Options Trader's Workbook which will push your knowledge on options like no other. I don't know why Mr. Augen is disseminating this strategy that most people would jealously guard. I can only assume from the nature of his other books that he is one of those who loves to teach and sees success in other people's success. Thank you Mr. Augen!

49 of 55 people found the following review helpful:

4.0 out of 5 stars Excellent theory ,but not practical for the average option trader, April 13, 2009

By	Christian Farman (Deerfield, MA) - See all my reviews (REAL NAME)

This review is from: Trading Options at Expiration: Strategies and Models for Winning the Endgame (Hardcover)

Before going into the details of my review I will quote some statements from the book:
"A relatively large amount of minute by minute stock and option data was used in preparation of this book....... First and foremost `in importance' was accuracy because slight discrepancies can cause significant errors in volatility calculations"

"It is certainly reasonable to study option expiration by studying the behavior of individual stocks that is one end of the spectrum . The other end involves development of custom data bases and software"
Before I buy any book, I usually look through the Table of Contents to get a glimpse of what the book covers. In this book the search inside feature was not available, so my decision to buy was based on the one review available at the time. Even though I am a successful options trader I could not resist the high potential profits in few hours mentioned in the review.
After reading the book, and based on the author's own assertions quoted above, an average option trader can use ideas qualitatively by studying the behavior of specific stocks and its effect on option premium at expiration. This may include volatility near expiration, open put call position lopsidedness, and distorted time value of the premium among others. While this information is available in other books , this book is useful in that it consolidates it in one small book together.
To quantitatively apply the concepts in this book you have to be able to: (1) obtain extensive and accurate stock and option data. (2) Be able to program and (3) be a full time dedicated option trader. Fortunately, I am a programmer and a full time option trader. I tried to get as accurate data as possible and generate option volatility decay charts for specific stocks I felt are good candidates. What I found is that there is a lot of noise in the volatility decay charts, as the author himself admits, that makes is difficult in practice to achieve such returns , even though it is possible in theory assuming ideal entry and exit.
I rate the book 5 stars for theory and research and 3 stars for practicality of application thus a total rating of 4 stars.

26 of 28 people found the following review helpful:

5.0 out of 5 stars Thought provoking strategies for serious option traders, April 7, 2009

By	Sreeram Ramakrishnan (Yorktown Heights, NY) - See all my reviews (TOP 1000 REVIEWER)    (REAL NAME)

Amazon Verified Purchase

This review is from: Trading Options at Expiration: Strategies and Models for Winning the Endgame (Hardcover)

In a very pithy and dense 'follow-up' to his previous "classic" The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets and a reasonably good workbook The Options Trader's Workbook: A Problem-Solving Approach, Augen provides a (very) serious options trader some key insights and strategies in dealing with options expiration dynamics.

This book is not for the casual investor looking to make a quick profit and some of the strategies mentioned, as the author himself points out, could have implications regarding whether you could be classified as a day trader for tax purposes.

The book is organized in three chapters. In the first chapter, the author explains three key observations regarding option pricing dynamics - volatility collapse, strike price pinning, and acceleration of time decay. He explains how each of these components contribute to option prices in the expiration week (and day) and provides some strong hints as to how to exploit them using some detailed examples. In the second chapter, the author provides some guidelines on the use of statistical models to identify potential candidates for implementing some of the strategies based on the three concepts mentioned above. The third chapter provides detailed descriptions of specific trading strategies on expiration Thursday and Friday.

Now, the caveats. While the book provides a serious student of options and a trader some excellent insights, it is not clear how accessible the tools one may need to execute any strategies outlined (thankfully, the author doesn't provide or pretend to provide a formulaic approach, but rather a generic, well thought out framework with enough details that a serious reader can develop his/her own strategy based on risk profile). The effectiveness of these techniques cannot, obviously, be solely judged by the examples the book contains. So, one needs to take a patient approach in critiquing the book's approach - it will take some time to develop a trading strategy and enough data points to make any meaningful conclusions regarding the effectiveness. But, it is clear that a serious reader will benefit tremendously by being encouraged to look into a perhaps a niche area in option trading in a very systematic and through manner, which in itself can significantly improve one's experience in option trading. A must-have book for the serious options student/trader.

(for what it is worth, I consider myself as a fairly conservative options trader, mostly focusing on spread strategies with a day job far away from the trading pits)