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Chapter 7: Introduction to Volatility

The Black-Scholes option pricing model, which was discussed in Chapter 4,possesses six input factors...

7.1- Historical Volatility

Historical volatility (HV), sometimesreferred to as realized volatility, can be defined as the past...

7.2- Implied Volatility

The last lesson introduced historical volatility, which allowsinvestors to analyze the fluctuations of a...

7.3- Normal Distributions

The previous lessons have introduced the basics of historical andimplied volatility. We will now build upon...

7.4- Volatility Skews

The last lesson on normal distribution helped quantify volatility and give investors a platform with which...

7.5- CBOE Volatility Index

The CBOE Volatility Index ($VIX) has become a popular subject in themedia the last few years. The index...

7.6- Hedging Techniques

As noted in the last lesson, the $VIX is not a proper hedge forportfolios over the long-term. Using OTM...

7.7- Put/Call Ratio

 The Put/Call Ratio gives valuable insight into investor sentiment on an underlying stock. In most...

7.8- Put/Call Parity

The put/call parity is the mathematical relationship between call and put options that share the same...

8.0- Chapter 8: Time Spreads

The strategies that have been discussed so far have signified eithera bullish or bearish bias on the...

8.1- Iron Condor (Credit Spread)

Investors use Iron Condors when they are neutral an underlyingstock and expect range bound trading between...

8.2- Butterfly (Debit Spread)

The Butterfly position is used when investors are targeting acertain price at expiration. Whereas an iron...

8.3- Calendar Spread (Debit Spread)

There are many different forms of calendar spreads. This lesson willfocus on the most common, which is the...

Chapter 9: Delta Neutral Trading

The strategies that have been discussed so far have signified eithera bullish or bearish bias on the...

9.1- Straddle (Debit Spread)

The straddle position is expensive to initiate but will profit froma large move either way in the...

9.2- Strangle (Debit Spread)

The strangle is much like a straddle position,however it requires less capital to initiate the trade...