Using Options to Manage Risk and Reward

Featuring Nancy Davis

Nancy Davis, managing partner and CIO of Quadratic Capital Management, joins Real Vision to provide an overview of the options market. She reviews the key Greek metrics that determine option prices, in addition to revealing a handful of trading tips for new investors. Nancy also discusses recent moves in emerging markets and how to capitalize the opportunity. Filmed on July 26, 2018 in New York.

Published on
29 August, 2018
Trading, Derivatives, Portfolio Management
27 minutes
Asset class


  • CL

    Chris L.

    4 11 2018 06:02

    0       0

    First rule of trading markets: the market doesn't "have to" do a damn thing.

  • HS

    Hisham S.

    14 9 2018 17:05

    3       0

    I love these interviews with Nancy.

  • nF

    nicholas F.

    6 9 2018 23:43

    2       0

    Great video and thanks for sharing solid options knowledge, Nancy. I'm looking to brush up on some more complex options strategies for rates and fx, any great books or blogs you would recommend? Thanks again for your time and contributions to RV!!!

  • MM

    Michael M.

    5 9 2018 01:55

    3       0

    Retail investors are able to express a rate view via options on the Eurodollar futures (GE). Eurodollar futures pricing is easy to understand (100 - the futures prices = the anticipated 3M forward LIBOR rate). As an example GE Dec16 '19 priced today (9/4/18) is 97.015 (implies 2.985% 3M LIBOR end of next year).

    IV in the options is relatively cheap, the multiplier & pricing are such that ATM (at-the-money) puts for the term previously mentioned can be a bit over $500 each if bought on a Futures price spike.

    The CME has a pdf on Understanding Eurodollar Futures with a great section at the end on how to use them to hedge floating rate loans. -

  • LP

    Lari P.

    4 9 2018 16:20

    2       0

    Would like to see more in-depth, practical video on this topic. Thanks!

  • PS

    Paul S.

    4 9 2018 11:54

    1       0

    "The sold put is the natural predator of the greedy investor" - Equity Options Trader, 2008

  • MT

    Mike T.

    2 9 2018 08:55

    3       5

    As an intro to Options I thought the views expressed in this video were entirely reasonable, until the bit about 'advise against selling options' aka short premium. I disagree most profoundly with this point of view. In a few words available here I will never be able to make convincing argument of the immense power of short premium strategies, but folks with curiosity should in my view aspire to achieving a level of appreciation of short premium option trading so that at a future point in time at least be able to make a more informed judgement as to the potential rather than simply believe it's all too scary and risky. For the curious of mind suggest commit to a 3 month period of study and importantly do something every day with the end prize being your eyes will be opened to the huge potential of short premium (credit) option trading.

    I've always thought ever since its inception conspicuous by its absence on RVTV has been any attempt to articulate the value of short premium option trading. I contemplate why might that be so? Possible answer? There's a conflict of interest. Those with competence at short premium option trading do NOT require someone to explain Global Macro narrative, do not need 'tips' or Trade ideas from others, can certainly do without Technical analysis and choosing my words very carefully do not require any of the aforementioned 'to find opportunity'.

  • TH

    Timo H.

    2 9 2018 07:10

    2       0

    I have this ominous feeling, that pension funds are trying to meet their objectives by selling options. I hope I'm wrong!

  • MS

    Mark S.

    1 9 2018 23:50

    1       0

    Liked this talk. Would have liked some details on how she manages positions. When does she become concerned about Vega, theta, gamma. What does she do?

  • CN

    Charles N.

    31 8 2018 06:48

    6       0

    Good options refresher course, though a bit slow for people who trade options regularly (I realize this was probably intended as a 101, which is perfectly fine - gotta start somewhere!). Please get Nancy back to discuss more strategic aspects like sizing, duration, vega, gamma, and underlying selection in a bit more detail

  • IO

    Igor O.

    31 8 2018 05:57

    13       0

    Make a series on options for advanced with visuals, I'll watch.

  • RD

    Ryan D.

    31 8 2018 01:42

    4       0

    Nice. Always like Nancy"s ideas and ability to inform. How about options on eurodollar Futures as an expression on rates?

  • AL

    Andrew L.

    30 8 2018 21:39

    12       2

    I am generally not negative on anything RealVision does but who is this video for? New to options? Well theres still way to much unexplained terminology. Not new to options, then why all the basics? This is a horrible format for this kind of material you really need visualizations of payout diagrams, slides with information to digest or web pages to read and re-read. Here we have a thousand little facts about options flying by and nobody is going to internalize that. I prefer OptionAlpha, amazing free educational material and podcast.

  • DF

    Dave F.

    30 8 2018 20:03

    3       0

    Enjoyed this interview.....

  • TB

    Tim B.

    30 8 2018 13:40

    3       0

    This was an excellent review of options, and definitely worth rewatching to let it soak in. At the same time, I also think there's room for a more beginner version. People have to start somewhere. Just a thought...

  • PB

    Pieter B.

    30 8 2018 11:20

    3       0

    Thanks a lot Nancy! This was very informative and great value!

  • SD

    S D.

    30 8 2018 06:13

    2       0

    This was filmed July 26?

  • SU

    Shakeel U.

    29 8 2018 23:43

    2       11

    It would be helpful if this video was in plain English, too much jargon here.

  • PG

    Philippe G.

    29 8 2018 23:29

    0       0

    Very informative!

    Note that Home Capital is a mortgage lender, not a home builder...

  • fT

    forecast T.

    29 8 2018 22:08

    0       1

    Will RTV add an on-video annotation feature soon? Similiar to thinkOrSwims ability to add a common on screen? In this case , a "bookmark" that's say limited to 250 characters?

  • fT

    forecast T.

    29 8 2018 21:30

    3       0

    Advise against writing options? Sure, where there isn't a clear strategy - assignment is an issue. Still, the credits collected and if you're savvy you've already factored in the likelihood of assignment, and how any dividend and potential growth will offset the loss.

  • SK

    Stuart K.

    29 8 2018 21:16

    4       0

    Great video on the inception of trades with defined risk and asymmetric risk/reward. I could listen to Nancy for hours.

  • CT

    Christopher T.

    29 8 2018 20:32

    5       1

    She's great

  • WB

    Wes B.

    29 8 2018 20:05

    7       0

    Most difficult part of option trading is getting the duration right. It would have been nice to hear her talk about how she handles timing. How far out does she typically go when buying options, 3 months, 6 months, etc?

  • MT

    Margo T.

    29 8 2018 20:01

    1       0

    Terrific video; should be required viewing for any investor.

  • AB

    AJ B.

    29 8 2018 19:39

    2       4

    For anyone new to options it is not this difficult. Have someone use plain language and not the Greeks

  • MM

    Mike M.

    29 8 2018 17:49

    1       0

    Excellent, enjoyed the presentation. Thank you.

  • SN

    Scott N.

    29 8 2018 17:09

    0       0

    Where's the download audio link?

  • RS

    Richard S.

    29 8 2018 16:36

    8       0

    Every time I listen to Nancy I am more impressed whether on CNBC or RealVision. She nailed to vol explosion in February by calling it before it happened as well as the Brazil meltdown. I also love her turning conventional wisdom on its ear by emphasizing that asymmetric can only be achieved through long delta option strategies. I found her comment about locking in the cost of borrow with long-dated puts to be very insightful. Please have her back as often as possible !

  • JS

    Jason S.

    29 8 2018 15:36

    1       0

    I'd also like to know how options trades (with vega etc) during the GFC. Reviewing history could be useful for the next financial meltdown, knowing the pitfalls etc. such as long puts on dow jones (as an example).

  • JS

    Jason S.

    29 8 2018 15:35

    1       0

    Awesome stuff - great to have a straight forward revision on oppies.

  • TE

    Tito E.

    29 8 2018 14:30

    4       1

    Crystal clarity! Thanks Nancy.

  • PM

    Patrick M.

    29 8 2018 13:19

    1       1

    Super Duper !!!

  • ss

    sid s.

    29 8 2018 13:17

    2       0

    does she have Twitter handle ?

  • V!

    Volatimothy !.

    29 8 2018 12:53

    5       0

    I’m not totally sure but I take it that discovering option miss pricing comes from identifying paradigm shifts. The greeks are priced from recent history.

    On a future episode of The Exchange lets get Nancy Davis, Mike Green, and Chris Cole or Ben Melkman as the third.

  • EC

    Eric C.

    29 8 2018 12:32

    0       0

    Great Video! Would have liked to hear 1 sentence on IV rank, even if it’s just “IV Rank is really important but beyond the scope for introducing options”

  • DI

    David I.

    29 8 2018 10:39

    4       0

    Great video, very informative. EWZ was a good learning curve for me also so thank you Nancy.

  • Nv

    Nick v.

    29 8 2018 10:29

    25       0

    Big fan. Bring her and Mike Green back any time
    Independent thinking