Track 02Module 6 of 68 sources
Structures that fit a view, and how sellers blow up
Match a structure to a view on direction, volatility and time, with the worst case written down first.
Key ideas
- Start from the view, not the strategy. Direction, size of move and timing each point to a different structure.
- Defined-risk spreads cost some edge and buy survival. Undefined-risk selling earns a premium until the one move that takes years of it back.
- Selling volatility has positive expected return and a very bad left tail. Position size is the whole game.
- Most option losses come from buying expensive volatility, selling too much cheap volatility, or ignoring costs.
Start hereWatch or read these first. They carry the core idea.
Course
Varsity Module 6: Option Strategies
Zerodha Varsity
Each common structure with payoff, break-evens and when to use it.
How to Lose Money Trading Options | Dr. Euan Sinclair @ Algo Trading Conference by Quantinsti
Video · QuantInsti Quantitative Learning · 1:06:27
A professional lists the ways traders lose money in options. Watch before selling anything.
30 Years of Options Trading: The Truth About What Actually Works | Euan Sinclair
Video · Trading with Groww · 1:10:57
Thirty years of lessons on what actually works.
CoreThe standard references. Work through them once the idea is clear.
Book
Positional Option Trading
Euan Sinclair
Finding an edge, choosing the structure and sizing it. The most practical options book.
Options Trading Strategy Guides
Playlist · projectoption · 46 videos
A video for every structure. Use as a reference.
Book
ETF 'Vol-mageddon': Lessons Learned for Investors
Video · Bloomberg Television · 2:54
February 2018 in three minutes: what happens when everyone is short volatility.
Go deeperResearch, primary sources and data for when you want the detail.
Report
BIS Quarterly Review, March 2018: the February volatility spike
BIS · 2018
The official post-mortem on that episode.
Practice
For one view you hold, build a defined-risk structure on paper. Write the maximum loss, the break-evens and the exit rule before you look at the premium.
See it live
Where this leads
08.1 · Risk, Losses and ProcessPosition sizing and risk of ruinTurn a stop distance and an account size into a position, and understand why sizing matters more than entries.08.3 · Risk, Losses and ProcessLeverage, crowding and blow-upsRecognise the conditions that turn a good trade into a disaster: leverage, crowding and liquidity that vanishes.