Average Reviews:
(More customer reviews)It's a good idea before buying a book, especially a book on options trading, whether you're in the audience for which the book was written. If you're a beginner, don't start here. I would recommend another book by the same author, "The Options Workbook." If you can make it through that book, you'll be more than prepared to take on this one.
Learning options or anything else involves two very different types of skills: (1) knowing how to do what you're trying to learn; (2) knowing how to learn it. You can learn (1) by studying the subject itself, but not (2). And unfortunately, there are very few options-trading books on the market that will teach you. The reason is that most of their authors, while they may be great traders, don't know how to teach. In fact, when it comes to giving satisfactory explanations, many are scatter-brained. The great strength of Saliba's books is that he does know how to teach. The books are in workbook format. He gives you examples of the strategies he's discussing, gives a fairly detailed analysis of each, and then offers practice questions (with answers) after each strategy, as well as at the end of each chapter. There's also a bonus final exam at the end of the book. This is sound teaching technique; these books are almost ideal for self-study. If you're anything like me, you learn by doing, not by staring at a page in a book. Both of Saliba's books are very hands-on.
Why do I say that Saliba's books are "almost ideal" for self-study? Because Saliba doesn't always spell out each of the steps that a beginner would have to know in order to justify the conclusions he draws. One thing a beginner has to know is how to construct a profit/loss table for any strategy he or she is studying, however simple or complex. And from that table, he or she must be able to construct the graph. Once this is done, he or she will know what the profit/loss picture looks like at expiration. The student will then know, for each price of the underlying at expiration, the intrinsic value of the component (long call, short call, long put, short put, long stock, short stock), and the profit/loss value for each. Once this is known, the combined profit-loss figure can easily be calculated. By looking at the table, one will know where the breakeven points are, as well as the maximum gain and maximum loss one can expect when putting on that strategy. "The Options Workbook" gives both profit-loss tables and graphs. But it doesn't make explicit how the values in the table are calculated. (Saliba probably assumes that the reader already knows this. But a beginner doesn't know this, unless he or she is told.) To close this pedagogical gap, I would recommend the beginner read James Bittman's book, "Options for the Stock Investor," especially chapters 1 and 2. While this process of constructing tables and graphs may at times be tedious, and even seemingly redundant, DON'T TRY TO SIDESTEP IT. Unless you understand the configuration of any option strategy at expiration, you really don't know what you're doing. And when you go online and click on the button to put on your position, you still won't know what you're doing. I'm convinced that a great many people who lose their shirts in the market, do so not because they were wrong in their prediction of the direction of movement in the underlying, but because their assessment of their positions were either wrong or incomplete.
"Option Spread Strategies" does a fine job of integrating the option Greeks, and volatility, into the analysis I've just described. However, this means that you have a working understanding of the Greeks before you begin. Saliba's discussion of the Greeks in "The Options Workbook" is woefully inadequate. In "Option Spread Strategies," as I said, he skillfully weaves the Greeks into the fabric of the strategies he discusses. But again, he's making great demands on the reader's understanding of the Greeks. To get a working knowledge of the Greeks, I would recommend two books: (1) "Trading Option Greeks," by Dan Passarelli; (2) "Trading Options as a Professional," by James Bittman. (All the books I've mentioned are available at Amazon.) In Bittman's book, focus on chapter 4. In that chapter, pages 118 to 134 are crucial, because Bittman hammers away at the essential distinction between option delta and position delta, option gamma and position gamma, and so on, for each of the Greeks. Unhappily for the beginner, the discussion is extremely terse. But it contains everything you have to understand to work with the Greeks. After I had torn out what little hair I have left, I finally got it. So will you. And when you've got it, you will be more than well-prepared to delve into Saliba's book "Option Spread Strategies." But please keep in mind, there are no shortcuts to learning options. If you don't expend the time and effort to learn before you expose yourself to the market, you'll most certainly learn from the market itself, the school of hard knocks. And I would say that paying the price for these books is a whole lot less traumatic. If you can't explain EXACTLY what you're doing when you put on an options position, what you hope to gain, and what you stand to lose, you don't understand it. Unfortunately, there's someone else taking the other side of your trade, whose face you'll never see and name you'll never know. He too may not understand what he's doing. But is that a risk you can afford to take?
Click Here to see more reviews about: Option Spread Strategies: Trading Up, Down, and Sideways Markets (Bloomberg Financial)
Get 34% OFF
0 comments:
Post a Comment