Options Trading Analysis Techniques

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Pythonic Methods for Options Pricing Analysis

• Black-Scholes Model
• Binomial Option Pricing Model

Getting Started:

Libraries Utilized:

pandas, numpy, pandas_datareader, datetime, matplotlib, scipy.stats, math, datascience, requests

European Option vs. American Option

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European:

• can only be exercised at expiration
• original Black-Scholes equation foundation

American:

• Binary Option:
• can be exercised whenever within contract
• Binomial Model

Call Option

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• Short Call: Trader is betting the underlying asset price will drop
  • Call Seller to sell security to Call Buyer at strike price when call exercised
  • Bearish -> reflecting fall in asset value
  • More risk -> less upfront money
  • Naked or Covered

Put Option

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Black Scholes

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Black Scholes

Implied Volatility:

Greeks:

• Delta
• Gamma
• Theta
• Vega
• Rho

Level of Underlying:

• time to expiration of one year
• no time to expiration
• time to expiration of three years

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TA Python Library

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Trend Indicators:

• Aroon Indicator
• Moving Average Convergence/Divergence (MACD)
• Exponential Moving Average (EMA)
• Simple Moving Average (SMA)
• Weighted Moving Average (WMA)
• TRIX Indicator
• Mass Index (MI)
• Ichimoku Indicator
• Know Sure Thing Oscillator (KST Signal)
• Detrended Price Oscillator (DPO)
• Commodity Channel Index (CCI)

• Average Directional Movement Index (ADX)
• Vortex Indicator (VI)
• Parabolic Stop and Reverse (Parabolic SAR)
• Schaff Trend Cycle (STC)

Momentum Indicators:

• Relative Strength Indicator (RSI)
• True Strength Indicator (TSI)
• Ultimate Oscillator
• Stochastic Oscillator
• Kaufman's Adaptive Moving Average (KAMA)
• Rate-Of-Change(ROC)
• Awesome Oscillator
• Williams %R
• Stochastic RSI
• Percentage Point Oscillator (PPO)
• Percentage Volume Oscillator (PVO)

References:

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• [Tokenist: How are Stock Prices Determined?]](https://tokenist.com/investing/how-are-stock-prices-determined/)

• Investopedia: Short Call