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

In this book, a hedge fund manager and an option trading coach show you how to earn steady, reliable income selling options by managing your option trades and running your option portfolio as a real business with consistent, steady returns. Packed with real-world examples, the authors show you how to manage your own "one man" hedge fund and make consistent profits from selling options by applying the basic framework and fundamental business model and principles of an "insurance company". This framework helps you to apply your option trading strategy to a solid, predictable, business model with consistent returns. For someone who has some knowledge of trading options and wants to become a consistent income earner. The authors provide a complete "operations manual" for setting up your business. Gain pearls of wisdom from both a professional options trader and coach, and from a hedge fund manager focused on managing an options based portfolio.

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.

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: OptionPit.com     201
Appendix D: Kite Spread     203
Index     205