1000 
Volatility trading, basics of (continued) 
"fudge factor," 731, 733 
implied volatility, 727, 732-743 
as predictor of actual volatility, 737-7 43 
LEAPS, 735, 736 
percentile, 734-735 
range, 735-737 
time left in option, 736-737 
Volatility Index ($VIX), 738 
moving averages, 732 
summary, 748 
trading, 7 43-7 44 
why volatility reaches extremes, 7 44-7 48 
bear market in underlying stock, 746-747 
cheap options, 747-748 
illiquid options, 745-746 
insider trading, 7 45 
sellers of volatility, danger for, 7 48 
supply and demand of public, 747 
Volatility trading techniques, 812-845 
as art and science, 812 
summary, 844-845 
trading volatility prediction, 814-837 
backspreads, 827, 834-836 (see also Volatility 
trading techniques, volatility backspread) 
calendar spread, selling, 833 
composite implied volatility reading, 815 
histogram, construction of, 831-832 
historical volatility, comparing current and past, 
821-824 
implied and historical volatility, comparing, 817-
818 
percentile of implied volatility approach, 814-817 
probability calculator, 824, 827-829 
reverse calendar spread, 833-834 
selecting strategy to use, 824-826 
selling volatility, 826-827, 833-836 
stock price history, using, 829-832 
summary, 836-837 
volatility chart, reading, 818-821 
when volatility is out of line, determining, 
814 
volatility backspread, 827, 834-836, 841 
margin, 836 
not for LEAPS options, 835 
volatility skew, trading, 837-844 
collar, 840 
Index 
differing implied volatilities on same underlying 
security, 837-838 
forward/positive volatility skew, 843 
reverse/negative volatility skew, 839-840 
summary, 844 
wrong predictions, two ways for, 813 
volatility skew, 813 
Warrants: 
covered writing against, 90-91 
rho, 872-873 
Wash sale rule, 922-923 
Whipsaw, 403 
Wrap symbols, 25-26 
Writer, definition, 6 
XMI (Major Market Index), 499