23: VIX "Backwardation" 106
Figure 24: Graphical representation of the 1st and 2nd standard deviation in the SPY with an IVR of 11 117
Figure 25: Probability of Profit Strangles; 1. vs. 2. standard deviation 119
Figure 26: Strangles; 1. vs. 2. standard deviation (simulation with 1 million USD account size, of which 25% was actively used for trades). 75% were held in cash. 119
Figure 27: Strangles, 1st vs. 2nd standard deviation, graphical 120
Figure 28: P/L-Diagram Short-Put 123
Figure 29: P/L-Diagram Short-Call 124
Figure 30: P/L-Diagram Strangle 125
Figure 31: P/L-Diagram at 10 DTE 127
Figure 32: P/L-Diagram at 45 DTE 128
Figure 33: P/L-Diagram Long-Put 130
Figure 34: P/L-Diagram Long Call 131
Figure 35: Example for narrow spreads, good volume and good open interest in the SPY 139
Figure 36: Example for the required Buying-Power of a Strangles in Canopy (CGC) 150
Figure 37: A healthy "middle course" through diversification 166
Figure 38: Historical vs. implied volatility 182
Figure 39: Sorting of shares according to IVR 184
Figure 40: P/L-Diagram Long-Put 189
Figure 41: P/L-Diagram Naked-Short-Put 192
Figure 42: P/L-Diagram Long-Call 196
Figure 43: P/L-Diagram Naked Short Call 199
Figure 44: P/L-Diagram Vertical Credit Spread (Put) 216
Figure 45: P/L-Diagram Vertical Credit Spread (Call) 218
Figure 46: P/L-Diagram Strangle 225
Figure 47: P/L-Diagram Iron Condor (same width of the Spreads) 228
Figure 48: P/L-Diagram Straddle 232
Figure 49: P/L-Diagram Iron Fly 236
Figure 50: P/L-Diagram Iron Fly (Example) 238
Figure 51: Take-Profit (before rolling) 272
Figure 52: Take-Profit (after rolling) 273
Figure 53: Rolling process based on a chart 285
Figure 54: Rolling process with P/L-Diagram 285
Figure 55: 1-year chart of ROKU 297
Figure 56: Theta decay over time 300
Figure 57: Strength of the theta decay based on different initial values 301
Figure 58: Comparison of trades with 21 / 45 DTE (in SPY) 302
Figure 59: Long-term comparison of different management approaches 303
Figure 60: Management by strategy 305
Figure 61: Strangles 305
Figure 62: Straddles 306
Figure 63: Naked-Put 306
Figure 64: Naked-Call 306
Figure 65: SPY is a fairly priced underlying 310
Figure 66: P/L-Diagram Strangle (green), Iron Condor with 1 USD (yellow) and 5 USD (turquoise) wide strikes 313
Figure 67: The Greeks: Strangle vs. Iron Condor 313
Figure 68: Influence of the Vega on IC and Strangle 314
Figure 69: Pro/Contra (un)defined risk-strategies 315
Figure 70: Difference in percentage premium at different VIX levels (average premium as a percentage of underlying price) 316
Figure 71: P/L Iron Condor vs. Strangle (low vs. high VIX) 317
Figure 72: Properties of different strategies 320
Figure 73: Volacrush in „BBBY“ before earnings. 328
Figure 74: Selection of the expiration cycle for an earnings trade in BBBY 329
Figure 75: VIX "mean-reverting" 2018 337
Figure 76: Example of a VXXB Trade (Vertical-Spread) 339
Figure 77: Example configuration FinViz 346
Figure 78: Results of the filter criteria at FinViz 348
Figure 79: Setup of a Ratio-Spread 351
Figure 80: P/L-Diagram Put-Ratio-Spread (1xΔ50 Long-Put; 2x Δ30 Short-Put) 352
Figure 81: Profit zone put-ratio spread (buy 1x Δ50 long put, sell 2x Δ30 short put) 353
Figure 82: Example Naked-Short-Put 363
Figure 83: Example Long Call Vertical 365
Figure 84: Example Short Put Vertical 367
Figure 85: Example Long Put Vertical 369
Figure 86: Example Naked Short Call 373
Figure 87: Example Short Call Vertical 375
Figure 88: Example Broken Wing Butterfly 378
Figure 89: Example Butterfly 381
Figure 90: Example Iron Condor 385
Figure 91: Example Iron Fly 388
Figure 92: Example Jade Lizard 390
Figure 93: Example Straddle 392
Figure 94: Example Strangle 394
List of abbreviations
A.M. Ante meridiem
AMC After Market Closing
ATM At-the-Money
Bln. Billion
BMO Before Market Opening
BTC Buying to Open
BTO Buying to Close
DTE Days till experation
ETC Exchange Traded Commodity
ETF Exchange Traded Fund
ETN Exchange Traded Note
USD USD
ITM In-the-Money
IV Implied Volatility
IVR Implied Volatility Rank
Mio. Million
OCC Options Clearing Corporation
OTM Out-of-the-Money
P.M. Post meridiem
P/L Profit/Loss
POP Potential of Profit
STC Selling to Close
STO Selling to Open
SQRT Squareroot
USD United States Dollar
Foreword
A good book always begins with an honest preface. So first of all I would like to thank you for holding my first book in your hands and I hope that you will be satisfied with it in the end. What made me write this book you might ask? I myself have been trading in different approaches to the financial markets for years and, like almost everyone else, had to teach myself everything from the ground up. I didn't have a mentor and I know how frustrating it can be to have to go on this journey alone. There are many offers within the financial world that promise you great wealth or want to make you a professional in a short time. Let's not kid ourselves, 99% of it is complete nonsense and brings you nothing,