The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options (paperback)

The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options (paperback)

by Dennis Chen, Mark Sebastian


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In this book, a hedge fund manager and an option trading coach show you how to earn steady, reliable option income trading options by managing your trades and running your option portfolio as a real business following the fundamental principles of an "insurance company". Mark Sebastian (, and hedge fund manager Dennis Chen (Smart Income Partners, Ltd.) explain why this particular business model offers such an attractive practical model for individual traders, and teaches the specific "how to"s you need to create and operate your personal option income portfolio this way. Sebastian and Chen begin by introducing their exclusive business model framework, identifying the option concepts most critical to long-term trading success, and presenting core income strategies based on selling rather than purchasing options. Next, they walk you through setting up your "business," offering a complete "operations manual" addressing each practical issue you'll face. The authors teach key lessons they've learned from their own experience -- including how to maintain trading discipline, manage volatility and risk, account for the "other" Greeks, and handle payments. Packed with real-world examples, this book reveals how professional money managers and hedge funds really manage their option trading operations -- and guides you step-by-step through setting up your portfolio and running your trades to earn the same high levels of income.

Product Details

ISBN-13: 9780134807522
Publisher: Pearson Education
Publication date: 05/18/2017
Pages: 240
Sales rank: 211,626
Product dimensions: 5.90(w) x 8.90(h) x 0.60(d)

About the Author

Dennis A. Chen is a hedge fund manager, investor, management advisor, and entrepreneur. He is the founder and Chief Investment Officer of Smart Income Partners, Ltd., a hedge fund specializing in generating income using index and equity options. Dennis has been investing and trading equities and options for many years. He has previously served as a management consultant at Bain & Company where he focused on financial services (banking and insurance). He was a principal at Diamond Technology Partners, Inc. As an entrepreneur, Dennis has purchased, improved, and sold several small businesses. He has experience in multiple industries, including banking, insurance, real estate, computer technology, Internet, publishing, advertising, construction, commodities, quick-service restaurants, and automotive. His broad business experience enables him to make better investment decisions at his hedge fund. Dennis earned his MBA from The Wharton School of Business. He also holds a Master’s in Computer Science from Arizona State University and a Bachelor’s degree in computer science from the University of Texas.

Mark Sebastian is a former member of both the Chicago Board Options Exchange and the American Stock Exchange. He is the Chief Operating Officer of Option Pit Mentoring and Consulting, a Chicago-based option education firm. Sebastian has been published nationally on Yahoo! Finance and has been quoted in The Wall Street Journal, Reuters, Bloomberg, and on Jim Cramer’s Mad Money show on CNBC. He has appeared on CNBC, Fox Business, and Bloomberg. He is an “all-star contributor” for The Street’s Option Profits Team. Mark is also the Managing Editor for Expiring Monthly: The Option Traders Journal digital magazine focused exclusively on options trading. He has spoken for the CBOE, the ISE, CME, and VOLX; is a co-host on the popular Option Block podcast; and the Volatility Views podcast. Mark has a Bachelor’s of Science in finance from Villanova University.

Table of Contents

Introduction 1
Part I: The Framework
Chapter 1: The Insurance Business 5
Chapter 2: Trade Selection 19
Chapter 3: Risk Management 31
Chapter 4: Trade Execution 43
Chapter 5: The Trading Plan 55
Chapter 6: Trading Infrastructure 63
Chapter 7: Learning Processes 73
Part II: Implementing the Business
Chapter 8: Understanding Volatility 81
Chapter 9: Most Used Strategies 89
Chapter 10: Operating the Business: Putting Together TOMIC 1.0 from A to Z 121
Part III: Lessons from the Trading Floor
Chapter 11: Lessons from the Trading Floor on Volatility 131
Chapter 12: Lessons from the Trading Floor on Risk Management 145
Chapter 13: Lessons from the Trading Floor on Trading and Execution 155
Chapter 14: Lessons from the Trading Floor on the Other Greeks 173
Chapter 15: The Beginning 191
Appendix A: Recommended Reading 195
Appendix B: Strategy Learning Sequence 199
Appendix C: 201
Appendix D: Kite Spread 203
Index 205

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