Natenberg Notes (1 of n)

I plan to start a series of notes from the book "Option Volatility and pricing" by Sheldon Natenberg. The book is considered very important for options traders. From this book, I would be noting down points relevant to trading. So here it begins.

Long Calls:

You expect

• The underlying contract to rise in price
• The underlying contract to move very swiftly.
• Volatility to rise.
• Time to decrease the value of your position.

Short Calls:

You expect

• The underlying contract to fall in price
• The underlying contract to move very slowly.
• Volatility to fall.
• Time to increase the value of your position.

Long Puts:

You expect

• The underlying contract to fall in price
• The underlying contract to move very swiftly.
• Volatility to rise.
• Time to decrease the value of your position.

Short Puts:

You expect

• The underlying contract to rise in price
• The underlying contract to move very slowly.
• Volatility to fall.
• Time to increase the value of your position.