Index 
Taxes (continued) 
put buyer, 910 
put writer, 910, 912 
60/40 rule, 912-913 
wash sale rule, 922-923 
TED spread, 701-702, 712-714 
carrying cost, 702 
Tender offers, risk arbitrage and, 451-454 
partial, 454 
short tendering, 453 
two-tier offers, 454 
Theta, 862-864, 866 
position theta, 877 
Time spread, 191-199 (see also Calendar spread) 
. Time value premium, 7-8, 11, 762-765 
and volatility trading, 106-107 
decay, 13-14 
for put options, 246-247 
"greeks" to measure, 763 
Total return concept of covered writing, 45-47, 60-61, 
93 
Tracking error: 
risk, index hedging and, 538,561, 571-572 
trading, 574-577 
Trading against the straddle strategy, 126-127, 287 
Trading options, details of, 27-32 (see also Options) 
Trapezoidal hedge, 155, 156, 157 
Trapezoidal Rule, 471 
Treasury bills, 413-421 (see also Options and 
Treasury bills) 
Uncovered call writing, 132-145 (see also Naked call 
writing) 
call option, 133-134 
Uncovered straddle write equivalent to ratio call write, 
306 
Underlying security, definition, 3 
Underlying stock, price of as factor influencing option 
price, 9-10 
Up delta concept, 100-101 
"Using box stock," 432 
Value Line Index, 532, 579, 582 
Vega of option, 749-753, 860-862 (see also Volatility, 
effects of) 
and excess value, 764 
option or position vega, 757,862 
Vertical put spreads, effect on of implied volatility, 
775-777 
Vertical spread, 169, 186 
Volatility, effect of on popular strategies, 7 49-782 
backspreads, 781-782 
calendar spreads, 778-780 
call bull spreads, 767-775 
vega of option, 768 
implied volatility, effect of, 749-782 
and delta, 753-754 
neutrality, effects on, 755-756 
outright option purchases and sales, 757-762 
position vega, 757 
put bear spreads, 777-778 
put option, 765-766 
ratio spreads, 780-781 
straddle/strangle buying and selling'. 766-767 
summary, 782 
999 
time value premium, 762-765 
delta, 764 
factors, five, 762-763 
"greeks" to measure, 763-764 
vega, 7 49-753 
and excess value, 764 
definition, 7 49-750 
vertical put spreads, 775-777 
Volatility, measuring and trading, 723-931 (see also 
under particular heading) 
advanced concepts, 846-907 
basics of volatility trading, 727-7 48 
definition, 859-860 
most important concept in option trading, 724 
stock prices, distribution of, 783-811 
taxes, 908-931 
volatility, effect of on popular strategies, 7 49-782 
volatility trading techniques, 812-845 
why trade "the market," 724-726 
Volatility, misconceptions about, 783-787 
buyer's rule, 787-789 
Volatility, prediction of, 799-803 
Volatility backspread, 827, 834-836, 841 
margin, 836 
not for LEAPS options, 835 
Volatility in Black-Scholes model, 460 
historical, 461-466 (see also Historical volatility) 
Volatility Index ($VIX), 738, 761, 785-786 
Volatility of stocks, 538-539 
adjusted, 539 
of underlying stock: 
as factor in option price, 13-14 
call option rankings and, 103-106 
Volatility skew, 517, 683, 685, 693-694, 813 
trading, 837-844 (see also Volatility trading) 
Volatility trading, basics of, 727-7 48 
definitions, 728-731 
historical volatility, 728-731 
implied volatility, 727, 732-743 
GARCH (Generalized Autoregressive Conditional 
Heteroskedasticity), 731-732