Buying and selling volatility.

Is it possible to make money the more the market or your stocks price fluctuates? The short answer is yes, but there is a catch and that is time vlue. What you need to know is explained in this book.

Buying and Selling Volatility (1997) by Kevin B. Connolly.

You can really forget the price movements, but you have to know that it is possible to bleed to death via Theta if you buy listed options and Vega (volatility) is also a term you have to master. Definitely a book that can be recommended for anyone who wants to know something about strategies other than buying and selling shares. It is not mathematically complicated.

There you can also read about how many believed that dynamic replication was the cause of the crisis in 1987 when the stock market plunged. The price movements were so rapid and dramatic that it became impossible to trade shares.

It also tells the story of how Baering Bank went broke by betting that the Nikki 225 index would remain at rest. You can make a good profit by selling (short) options if they die “out of the money”. Then you cash in the entire option value.
But an earthquake can destroy the whole scheme. Baring Bank tried to hold up the Nikkei index, while the rest of the world sold in panic. A few days passed and then one of England’s most respected old banks was history.






Leave a Reply

Your email address will not be published. Required fields are marked *