Exotic Options Trading (The Wiley Finance Series) Review

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(More customer reviews)This book is an excellent resource and expose of most exotic options traded around the globe. It cuts to the really essential parts of the options quickly. No in-depth math analysis. De Weert lists the essential formulas and payoff functions in a readable and understandable format. He also gives some practical hints and explains some pitfalls one should be aware of. Both traders and quants will find this an excellent reference.

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Written by an experienced trader and consultant, Frans de Weert's Exotic Options Trading offers a risk-focused approach to the pricing of exotic options. By giving readers the necessary tools to understand exotic options, this book serves as a manual to equip the reader with the skills to price and risk manage the most common and the most complex exotic options.

De Weert begins by explaining the risks associated with trading an exotic option before dissecting these risks through a detailed analysis of the actual economics and Greeks rather than solely stating the mathematical formulae. The book limits the use of mathematics to explain exotic options from an economic and risk perspective by means of real life examples leading to a practical interpretation of the mathematical pricing formulae.

The book covers conventional options, digital options, barrier options, cliquets, quanto options, outperformance options and variance swaps, and explains difficult concepts in simple terms, with a practical approach that gives the reader a full understanding of every aspect of each exotic option. The book also discusses structured notes with exotic options embedded in them, such as reverse convertibles, callable and puttable reverse convertibles and autocallables and shows the rationale behind these structures and their associated risks.

For each exotic option, the author makes clear why there is an investor demand; explains where the risks lie and how this affects the actual pricing; shows how best to hedge any vega or gamma exposure embedded in the exotic option and discusses the skew exposure.

By explaining the practical implications for every exotic option and how it affects the price, in addition to the necessary mathematical derivations and tools for pricing exotic options, Exotic Options Trading removes the mystique surrounding exotic options in order to give the reader a full understanding of every aspect of each exotic option, creating a useable tool for dealing with exotic options in practice.
"Although exotic options are not a new subject in finance, the coverage traditionally afforded by many texts is either too high level or overly mathematical. De Weert's exceptional text fills this gap superbly. It is a rigorous treatment of a number of exotic structures and includes numerous examples to clearly illustrate the principles. What makes this book unique is that it manages to strike a fantastic balance between the theory and actual trading practice. Although it may be something of an overused phrase to describe this book as compulsory reading, I can assure any reader they will not be disappointed."
—Neil Schofield, Training Consultant and author of Commodity Derivatives: Markets and Applications

"Exotic Options Trading does an excellent job in providing a succinct and exhaustive overview of exotic options. The real edge of this book is that it explains exotic options from a risk and economical perspective and provides a clear link to the actual profit and pricing formulae. In short, a must read for anyone who wants to get deep insights into exotic options and start trading them profitably."
—Arturo Bignardi

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Long/Short Market Dynamics: Trading Strategies for Today's Markets (Wiley Trading) Review

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(More customer reviews)Most financial market books, especially those on TA, seem as though addressed to prospective targets: "Suckers, use my superdooper-specialized proprietary method, trade a lot, get my newsletter, and open an account at my very own, highly recommended XYZ brokerage firm." They are, generally, composed of descriptions of too-well known indicators, replete with glowing, yet unsubstantiated, accounts of the profits the author has obtained by using them. Even the more serious attempts, like those of John Murphy, are merely encyclopedic gatherings of indicators, with little effort made to determine their objective utility or profitability; or, like Kaufman's, while addressing a more intelligent, educated technician, too compendious. Sadly, the better books present the reader with barely more than introductions to approaches that are mathematically and computationally more rigorous; and, while they may also indicate further directions of study, do little in the way of providing it.
This book, I am happy to say, avoids all of these objections.
The author discusses and describes a number of statistical methods, and develops them into tools with which to measure and identify market development and direction. And though his instruction is often brief, it is to the point. This adds a certain density to the presentation, but it IS presented. As an example, he uses a quantile segregation of price-data to reduce the adverse effects of noise in a moving average. He indicates in two sentences the formula to use in EXCEL to obtain it. Testing of these tools is, of course, the responsibility of the reader, but there is no arguing the fresh, original character of these methods, and the patience with which the author explains them. If nothing else, it stimulates the imagination. Wait, that is everything, isn't it?
Very highly recommended.

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Hedge funds are now the largest volume players in the capital markets. They follow a wide assortment of strategies but their activities have replaced and overshadowed the traditional model of the long only portfolio manager. Many of the traditional technical indicators and commonly accepted trading strategies have become obsolete or ineffective.
The focus throughout the book is to describe the principal innovations that have been made within the equity markets over the last several years and that have changed the ground rules for trading activities. By understanding these changes the active trader is far better equipped to profit in today's more complex and risky markets. Long/Short Market Dynamics includes:
A completely new technique, Comparative Quantiles Analysis, for identifying market turning points is introduced. It is based on statistical techniques that can be used to recognize money flow and price/momentum divergences that can provide substantial profit opportunities.
Power laws, regime shifts, self-organized criticality, phase transitions, network dynamics, econophysics, algorithmic trading and other ideas from the science of complexity are examined. All are described as concretely as possible and avoiding unnecessary mathematics and formalism.
Alpha generation, portfolio construction, hedge ratios, and beta neutral portfolios are illustrated with case studies and worked examples.
Episodes of financial contagion are illustrated with a proposed explanation of their origins within underlying market dynamics

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The Mathematics of Options Trading Review

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(More customer reviews)This book fails on so many fronts that space simply wont allow to cover everything. First off, the author commits the crime of not knowing his audience. He assumes that you know nothing about options and very little about math. He then proceeds to bore you in early chapters with math that isn't even required later on. What's the point!? Its not until you get half way through the book that you finally get into the real meat. By then, he's makes a huge leap from reviewing how you add 1 + 1 to suddenly assuming that you know 1st year college calculus all in the matter of 1 chapter. In short, he tries to appeal to all, but misses the mark. I am an engineer, I know math, thats why picked up this book!!
Technically, I have many issues. First off, he more or less states that when selling naked puts you shouldn't worry about a move greater than 4 standard deviations because they never happen. Well my friend, although moves such as these do not occur frequently, they do occur often enough that I'd be concerned about using such a stratedgy. I have real life data from the past year to back up my claims. All the author has is theory. Go ask anyone holding a naked put in a pharmacutical company that just got shot down by the FDA what they think of a 4 SD move. They happen.
The author then states throughout the book that these are his claims for how the methods that he presents should work, but he then goes on to say that they should be tested before committing any real money. What the heck!? Why publish a book only to say that you should do your own research to prove his methods!?
I've been waiting for such a book for years! All the other options books out there miss the point of expected value. This book shines on that front. What's the point of winning 90% of your trades if you're a loser at the end of the day. That's the power of expected value. For years I've thought that if I could only come up with a way to accurately calculate expected values on options, then I could turn wall street into my own little casino and retire early! Well, its not that easy!
I've been doing my own research for the past year on all the formulas presented in this book. I've analyzed 1,000's of positions every month on spread sheets with easily downloadable data. Word of warning, dont bet your house on the expected values holding up. Distributions of returns vary from month to month and they also vary depending on the length of time involved. These distribution profiles vary enough to screw up expected values. Distribution profiles also vary greatly depending if you're looking at a large cap or micro cap stock. Do your own research as the author warns and you'll see for yourself. Its been a very frustrating process because in theory the math should work and I should be rich by now, but in practice it doesn't work so well. It just speaks volumes to how difficult it is to make money long term trading options.
I haven't given up the chase yet as I am continuing on with my research, testing and tweaking. This book should be credited for pushing me in the right direction, but its disappointing that the book falls short on its own real world exhaustive research.


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Option Pricing: Black-Scholes Made Easy (Wiley Trading) Review

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(More customer reviews)Any student or trainee having to study this topic really should buy this tutorial.
Having a degree in Mathematics and a professional accountancy qualification did not prepare me for the explanations of Black Scholes to be found in most text books.
They may have got a Nobel prize for their option pricing model but Black and Scholes were never going to get an award for clarity of explanation.
Having grappled with this area for a few months, I decided I needed a little more innovative help; hence my purchase of Jerry Marlow's interactive tutorial.
Two days later and I feel I could go for the next Nobel prize myself!
So many things click into place so quickly, it's marvellous.
Jerry gives his email address which I had to resort to for one query. He answered most helpfully within a couple of hours.
I suspect that it helps to have had an overview appreciation of the area before starting the tutorial but this shouldn't deter first timers from starting with this.

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A intuitive and powerful approach to mastering one of the most important options trading toolsIn 1997, the Nobel Prize in Economics was awarded for the work that led to Black-Scholes Options-Pricing Theory. Black-Scholes has become the dominant way of understanding the relationships among options prices, stock forecasts, and expected stock-market volatility. Option Pricing: Black-Scholes Made Easy, a book and interactive, animated tutorial, makes this sophisticated way of thinking accessible to everyday traders. Animations and simulations present the material in a simple, visual and interactive manner. They allow readers to understand easily and intuitively the concepts and outcomes of Black-Scholes and probability distributions. Black-Scholes Options-Pricing Theory revealed that investing in options is a probability game. Option Pricing: Black-Scholes Made Easy shows you your odds.Jerry Marlow (New York, NY) is a freelance financial writer and marketing consultant. For investment firms, he creates marketing and educational presentation that bridge the gap between how sophisticated financial mangers think about investing and how the firms' clients think about investing.

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Advanced Option Pricing Models Review

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(More customer reviews)Katz's book on Advanced Options Pricing offers traders additional insight into limitations and errors found in traditional pricing models. For those of us that write mechanical options trading systems, particularly combination models, Jeff's book is a must read. If you are an options price researcher looking for in depth advanced pricingmodel discovery, analysis and mathematics, this book is probably not for you. However, if you are looking at ways to improve your existing models thus converging the error between empirically derived options system equity curves and those equity curves derived from options models, you should read this book. As most traders know, efficient entry and exit points in the market often occur during periods when pricing models break down, so the more you can learn about options behavior during this transient period, the better your overall trading system will be.

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Options on Foreign Exchange (Wiley Finance) Review

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(More customer reviews)This book is a nice introduction to the subject. A trader would benefit from reading the text more than a financial engineer would. It may be a good idea to read the author's "Currency Derivatives," as well. People who have read any text at the level of Hull or higher are advised to move on to "Currency Derivatives" directly.

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Financial Derivatives, 3rd Edition Review

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(More customer reviews)This is a quick and easy guide to understanding derivatives. Excellent as a brief reference quide. Would recommend to professionals working with these products.

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Understand derivatives in a nonmathematical wayFinancial Derivatives, Third Edition gives readers a broad working knowledge of derivatives. For individuals who want to understand derivatives without getting bogged down in the mathematics surrounding their pricing and valuation Financial Derivatives, Third Edition is the perfect read. This comprehensive resource provides a thorough introduction to financial derivatives and their importance to risk management in a corporate setting.

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Exotic Options and Hybrids: A Guide to Structuring, Pricing and Trading (The Wiley Finance Series) Review

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(More customer reviews)Great book which strikes an apt balance between theory and practice. There a lot more complicated texts but they are not as intuitive as this one. Also the treatment of risks for various structured products gives a great overview of how dealers approach such exotics. The author also delivers various common sensical reasons on which models to use and when. Helped me understand a lot of stuff much better than any other such reference. I would recommend it to everyone.

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The recent financial crisis brought to light many of the misunderstandings and misuses of exotic derivatives. With market participants on both the buy and sell-side having been found guilty of not understanding the products they were dealing with, never before has there been a greater need for clarification and explanation.

Exotic Options and Hybrids is a practical guide to structuring, pricing and hedging complex exotic options and hybrid derivatives that will serve readers through the recent crisis, the road to recovery, the next bull market and beyond. Written by experienced practitioners, it focuses on the three main parts of a derivative's life: the structuring of a product, its pricing and its hedging.
Divided into four parts, the book covers a multitude of structures, encompassing many of the most up-to-date and promising products from exotic equity derivatives and structured notes to hybrid derivatives and dynamic strategies. Based on a realistic setting from the heart of the business, inside a derivatives operation, the practical and intuitive discussions of these aspects make these exotic concepts truly accessible.

Adoptions of real trades are examined in detail, and all of the numerous examples are carefully selected so as to highlight interesting and significant aspects of the business. The introduction of payoff structures is accompanied by scenario analysis, diagrams and lifelike sample term sheets. Readers learn how to spot where the risks lie to pave the way for sound valuation and hedging of such products. There are also questions and accompanying discussions dispersed in the text, each exploited to illustrate one or more concepts from the context in which they are set.
The applications, the strengths and the limitations of various models are highlighted, in relevance to the products and their risks, rather than the model implementations. Models are de-mystified in separately dedicated sections, but their implications are alluded to throughout the book in an intuitive and non-mathematical manner.
By discussing exotic options and hybrids in a practical, non-mathematical and highly intuitive setting, this book will blast through the misunderstanding of exotic derivatives, enabling practitioners to fully understand and correctly structure, price and hedge theses products effectively, and stand strong as the only book in its class to make these "exotic" concepts truly accessible.

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Increasing Alpha with Options: Trading Strategies Using Technical Analysis and Market Indicators (Bloomberg Financial) Review

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(More customer reviews)Increasing Alpha with Options by Scott H. Fullman, CMT (Bloomberg Press, $55)
Because options expire, investing using them is a lot like humor--timing is everything. Fortunately, in this book, one is not only introduced to options strategies such as writing covered calls, strangles, and straddles, but is shown how to use basic technical analysis to determine the direction, magnitude, and speed of the underlying stock changes and thus the appropriate option contracts to capitalize on the expected stock price movement. More importantly, he goes on to spell out the risks involved and shares valuable rules of thumb from his 30+ years in financial services.
Mr. Fullman's book not only spells out the basics of options and technical analysis, but also shows how options can be used to hedge exposure in the real world to create positive alpha--performance better than that of the overall market. It should find a broad audience among pension fund, endowment, and hedge fund managers who seek to maximize returns while reducing risk. For individual investors seeking to earn better returns than a buy-and-hold strategy offers without taking on undue risk, it opens the door to a rich set of possibilities.
Both experienced and novice options investors will find the tables comparing various strategies for achieving an investment objective instructive. These tables compare the net cost, capital requirements, upside potential, downside risk, and break-even for strategies designed to accomplish the same objective, e.g., a bullish investment in a stock. By ranking each alternative strategy--long call, bullish call spread, bullish ratio spread, bull spread with short put, or outright purchase of the stock--investors can determine which strategy is most robust given their risk/reward preferences.
Michael J. Ham, CFA


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Innovative trading strategies, which combine the use of technical analysis, market indicators, and options
In the new world of investing, money managers must deal with a variety of dynamics, products, analyses, and risk controls. They are also expected to achieve above-benchmark performance and profits, also known as alpha, as well as protect capital in the process. This can be difficult to achieve in today's turbulent market environment, but with Increasing Alpha with Options, author Scott Fullman, the Director of Derivative Investment Strategy for WJB Capital Group, offers some solid solutions.
Written in a straightforward and accessible style, this reliable resource outlines various trading strategies using a combination of technical analysis, market indicators, and options. Along the way, it skillfully details how these analytical techniques can help you capture profits while also protecting positions from adverse market conditions.
Details the varying elements of technical analysis, from chart type and analysis period to time itself
Highlights how to build strategies around reversal and continuation patterns, oscillators, and exchange-traded funds
Reveals how you can exploit small inefficiencies in the options marketplace


Filled with in-depth insights and expert advice, Increasing Alpha with Options will quickly familiarize you with everything from the various elements of technical analysis to leveraging the power of options, and show you how applying these tools and techniques to your trading or investing endeavors can improve overall performance.

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Getting Started in Futures Review

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(More customer reviews)I've read many futures trading books and I think this is "the" best book for beginners. The language is easy to understand and the author explained things step by step in a very organized matter. If you ever consider learning about futures, this is the book you have to read. I still use it as reference and it's one of my favorite books.

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"If you've never traded futures but would like to, this book is highly recommended. An excellent introduction to the futures markets and also a useful reference source for the seasoned trader."--Thomas E. Aspray, Editorial Director and Chief Analyst, Traders' Library
"No one explains complex financial strategies as clearly and intelligently as Todd Lofton. If you're intrigued by the possibility of making money in the futures markets, Getting Started in Futures is the very best place to start your education."--Karl Weber, coauthor (with Jonathan M. Tisch) of The Power of We: Succeeding Through Partnerships
Getting Started in Futures explains in simple, easy-to-understand terms everything you need to know to start trading futures successfully. You'll learn how to forecast prices, how hedging works, and how to take advantage of new electronic trading opportunities. The updated Fifth Edition includes discussions on the increasingly important role of futures markets in foreign currencies, equity indexes, interest rates, and proper money management. You'll also fin a complete chapter on single-stock futures -- the newest financial futures market. Order your copy today!

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The New Options Advantage: Gaining a Trading Edge Over the Markets, Revised Edition Review

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(More customer reviews)A good choice for stock option investors despite it mentioning commmodities. This book will overwhelm a beginner, who should start with Charles Caes' great "Tools of the Bear" (which works for bull and bear markets). Far superior to George Fontanills. Caplan is creative, he writes well and gives the studious reader many important tips. I made two pages of notes from this book. With even a little experience, an options investor will truly ascend to a higher level of knowledge and trading mastery with this book.

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Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes (Wiley Trading) Review

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(More customer reviews)I found the book quite accurate in the information it presents (on VIX, its derivatives, and their use for hedging and speculation) -- but a lot of that information can be gleaned for free on the CBOE site, so, to justify its cost, I think a book should offer "added value" via engaging, easy-to-follow, makes-you-want-to-keep-reading writing.
Alas, this book's writing style is about as dry as that found on the CBOE site, making it a hard slog to read and digest cover to cover even, though it's a short book. And no, it's not the subject matter that forces such a dry style: McMillan's writings on options and volatility are just as engaging and absorbing as I would wish, for example.
The single-chapter intro to some options basics is too short and probably insufficient if you lack that info (there's just too much more you need to know about options!), while it's redundant if you already know that information.
Probably inevitable, but still a bit disappointing, is the very incomplete coverage of VIX-centric ETFs and ETNs -- no doubt because the field keeps evolving very fast. For example, while the book does mention ("cover" would be an overbid) thinly-traded, rather-flat inverse-VIX ETN VXX, if does not have a word about fast-moving, highly liquid XIV (almost 10 times larger in market cap and dollar trading volume). I guess an ETN that started trading in November 2010 could not be covered in a book published in August 2011...?
So, nothing deeply nor terribly about the book, but -- I think it just doesn't really pull its weight. I'd suggest starting with cboe.com, and [...] for a list of VIX-centric ETF to use as a start for your own research on how each of them is structured and performs.


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A guide to using the VIX to forecast and trade markets
Known as the fear index, the VIX provides a snapshot of expectations about future stock market volatility and generally moves inversely to the overall stock market. Trading VIX Derivatives will show you how to use the Chicago Board Options Exchange's S&P 500 volatility index to gauge fear and greed in the market, use market volatility to your advantage, and hedge stock portfolios. Engaging and informative, this book skillfully explains the mechanics and strategies associated with trading VIX options, futures, exchange traded notes, and options on exchange traded notes.
Many market participants look at the VIX to help understand market sentiment and predict turning points. With a slew of VIX index trading products now available, traders can use a variety of strategies to speculate outright on the direction of market volatility, but they can also utilize these products in conjunction with other instruments to create spread trades or hedge their overall risk.
Reviews how to use the VIX to forecast market turning points, as well as reveals what it takes to implement trading strategies using VIX options, futures, and ETNs
Accessible to active individual traders, but sufficiently sophisticated for professional traders
Offers insights on how volatility-based strategies can be used to provide diversification and enhance returns

Written by Russell Rhoads, a top instructor at the CBOE's Options Institute, this book reflects on the wide range of uses associated with the VIX and will interest anyone looking for profitable new forecasting and trading techniques.

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Option Spread Strategies: Trading Up, Down, and Sideways Markets (Bloomberg Financial) Review

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(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?

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Volatility Trading, + CD-ROM (Wiley Trading) Review

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(More customer reviews)Over the course of my career I have come to own literally hundreds of books about derivatives pricing and trading. Few of these books manage to communicate the essence of what a professional derivatives trader needs to do to be successful. Volatility Trading is truly rare in that it presents a framework for analysis that is supported by a clear, well-defined trading philosophy: systematically find an edge and learn how to exploit it correctly. It takes a lot of experience, time, and energy to know - and I mean really know - what Sinclair shares in this book.
I found the chapter on volatility measurement and forecasting to be particularly useful. Few options traders take the time to understand the efficiency of their volatility estimators. Even fewer could clearly communicate that what we need is a view on the volatility distribution rather than a point forecast when we are trading volatility.
The author's mix of trading philosophy, quantitative intuition, and obvious trading experience is refreshing. The straight-forward no nonsense writing style also makes the book very readable. I would recommend this book to any quantitatively-minded trader. The chapter on money-management alone is easily worth the price of the book.

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In Volatility Trading, Sinclair offers you a quantitative model for measuring volatility in order to gain an edge in your everyday option trading endeavors. With an accessible, straightforward approach. He guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation. In addition, Sinclair explains the often-overlooked psychological aspects of trading, revealing both how behavioral psychology can create market conditions traders can take advantage of-and how it can lead them astray. Psychological biases, he asserts, are probably the drivers behind most sources of edge available to a volatility trader.Your goal, Sinclair explains, must be clearly defined and easily expressed-if you cannot explain it in one sentence, you probably aren't completely clear about what it is. The same applies to your statistical edge. If you do not know exactly what your edge is, you shouldn't trade. He shows how, in addition to the numerical evaluation of a potential trade, you should be able to identify and evaluate the reason why implied volatility is priced where it is, that is, why an edge exists. This means it is also necessary to be on top of recent news stories, sector trends, and behavioral psychology. Finally, Sinclair underscores why trades need to be sized correctly, which means that each trade is evaluated according to its projected return and risk in the overall context of your goals.As the author concludes, while we also need to pay attention to seemingly mundane things like having good execution software, a comfortable office, and getting enough sleep, it is knowledge that is the ultimate source of edge. So, all else being equal, the trader with the greater knowledge will be the more successful. This book, and its companion CD-ROM, will provide that knowledge. The CD-ROM includes spreadsheets designed to help you forecast volatility and evaluate trades together with simulation engines.

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Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profit (Bloomberg Financial) Review

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(More customer reviews)When I bought this book, I was expecting really in-depth analysis of various Greeks and their effects on basic option positions as well as complex spreads. However, I was bit disappointed.
If you have read any decent preliminary option trading books (Natenberg, McMillan et al) or if you have been trading option spreads for say 1+ year, this book would be useless. In aggregate there would be about 10-12 page material which may useful for such people. Last chapter on relationships between implied and realized volatility is OK.
For some reason the author has morbid fear for graphs of positions and greeks. He ends up giving tables after tables to illustrate effect of various greeks on option position.
If you are at a stage where you think I buy call option when I am bullish and I buy put option when I am bearish, this book will help you understand the effects of other equally important variables in pricing and trading, but then there are so many other which give this information in a better fashion in my opinion.

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Trading Options at Expiration: Strategies and Models for Winning the Endgame Review

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(More customer reviews)Before going into the details of my review I will quote some statements from the book:
"A relatively large amount of minute by minute stock and option data was used in preparation of this book....... First and foremost `in importance' was accuracy because slight discrepancies can cause significant errors in volatility calculations"
"It is certainly reasonable to study option expiration by studying the behavior of individual stocks that is one end of the spectrum . The other end involves development of custom data bases and software"
Before I buy any book, I usually look through the Table of Contents to get a glimpse of what the book covers. In this book the search inside feature was not available, so my decision to buy was based on the one review available at the time. Even though I am a successful options trader I could not resist the high potential profits in few hours mentioned in the review.
After reading the book, and based on the author's own assertions quoted above, an average option trader can use ideas qualitatively by studying the behavior of specific stocks and its effect on option premium at expiration. This may include volatility near expiration, open put call position lopsidedness, and distorted time value of the premium among others. While this information is available in other books , this book is useful in that it consolidates it in one small book together.
To quantitatively apply the concepts in this book you have to be able to: (1) obtain extensive and accurate stock and option data. (2) Be able to program and (3) be a full time dedicated option trader. Fortunately, I am a programmer and a full time option trader. I tried to get as accurate data as possible and generate option volatility decay charts for specific stocks I felt are good candidates. What I found is that there is a lot of noise in the volatility decay charts, as the author himself admits, that makes is difficult in practice to achieve such returns , even though it is possible in theory assuming ideal entry and exit.
I rate the book 5 stars for theory and research and 3 stars for practicality of application thus a total rating of 4 stars.


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"Learn and profit from Jeff Augen's book: It clearly explains how to take advantage of market inefficiencies in collapsing implied volatility, effects of strike price, and time decay. A must-read for individuals who are options oriented."--Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance"A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading."--Alexis Goldstein, Vice President, Equity Derivatives Business Analyst"Mr. Augen makes a careful and systematic study of option prices at expiration. His translation of price behavior into trading strategy is intriguing work, and the level of detail is impressive."--Dr. Robert Jennings, Professor of Finance, Indiana University Kelly School of Business"This book fills a gap in the vast amount of literature on derivatives trading and stands out for being extremely well written, clear, concise, and very low on jargon--perfect for traders looking to evolve their equity option strategies."--Nazzaro Angelini, Principal, Spearpoint Capital"Instead of considering macro-time strategies that take weeks to unfold, Jeff Augen is thinking micro here--hours or days--specifically the days or hours right before expiration, and harnessing grinding, remorseless options decay for profit. He builds a compelling case for the strategy here. The concept of using ratio spreads plus risk management for as brief a period as one day--open to close--to capture expiring premium is worth the price of admission alone. A superb follow-up to his first book. Must-read for the serious options student."--John A. Sarkett, Option Wizard softwareEquity and index options expire on the third Friday of each month. As that moment approaches, unusual market forces create option price distortions, rarely understood by most investors. These distortions give rise to outstanding trading opportunities with enormous profit potential. In Trading Options at Expiration, leading options trader Jeff Augen explores this extraordinary opportunity with never-before published statistical models, minute-by-minute pricing analysis, and optimized trading strategies that regularly deliver returns of 40%-300% per trade.You'll learn how to structure positions that profit from end-of-contract price distortions with remarkably low risk. These strategies don't rely on your ability to pick stocks or predict market direction and they only require one or two days of market exposure per month. If you're looking for an innovative new way to reignite your returns no matter where the markets move, you've found it in Trading Options at Expiration. Why traditional option pricing calculations always break down in the final days before expirationThree powerful end-of-cycle effects not comprehended by contemporary pricing models

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The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets Review

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(More customer reviews)A friend of mine in the trading industry suggested I read this gem of a book ... within a single weekend I did just that ... and what a gem it is!
Jeff Augen has put together a fine body of work in this book within which there are some seriously valuable nuggets of information.
The volatility spike graphs are a novelty in this business that anyone studying and trading volatility should benefit from. Essentially what he's uncovering is "differential volatility", in other words whether the volatility is being caused by buyers or sellers.
Typically, falling prices (due to selling action) will cause greater volatility, but not always. Sometimes the volatility is caused by rising prices. By understanding the direction in which the greater volatility of the underlying is occurring, the trader is able to position trades more appropriate to that skew. For example if the spikes indicate that volatility is caused by buying action then the calls may well be undervalued in advance of the next spike up. The trader can then make a double whammy trade, correct in direction and correctly in volatility.
Other nuggets include Jeff's slant on expiration date and earnings cycle trading, and the concept of stocks pinning to the strike, all of which are essential chapters in the book.
You'll be a more knowledgeable trader for reading this book and you should become a better trader for sure.


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"Jeff's analysis is unique, at least among academic derivatives textbooks. I would definitely use this material in my derivatives class, as I believe students would benefit from analyzing the many dimensions of Jeff's trading strategies. I especially found the material on trading the earnings cycle and discussion of how to insure against price jumps at known events very worthwhile."—DR. ROBERT JENNINGS, Professor of Finance, Indiana University Kelley School of Business"This is not just another book about options trading. The author shares a plethora of knowledge based on 20 years of trading experience and study of the financial markets. Jeff explains the myriad of complexities about options in a manner that is insightful and easy to understand. Given the growth in the options and derivatives markets over the past five years, this book is required reading for any serious investor or anyone in the financial service industries."—MICHAEL P. O'HARE, Head of Mergers & Acquisitions, Oppenheimer & Co. Inc."Those in the know will find this book to be an excellent resource and practical guide with exciting new insights into investing and hedging with options."—JIM MEYER, Managing Director, Sasqua Field Capital Partners LLC"Jeff has focused everything I knew about options pricing and more through a hyper-insightful lens! This book provides a unique and practical perspective about options trading that should be required reading for professional and individual investors."—ARTHUR TISI, Founder and CEO, EXA Infosystems; private investor and options traderIn The Volatility Edge in Options Trading, leading options trader Jeff Augen introduces breakthrough strategies for identifying subtle price distortions that arise from changes in market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques that every experienced options trader can use to study historical price changes, mitigate risk, limit market exposure, and structure mathematically sound high-return options positions. Augen bridges the gap between pricing theory mathematics and market realities, covering topics addressed in no other options trading book. He introduces new ways to exploit the rising volatility that precedes earnings releases; trade the monthly options expiration cycle; leverage put:call price parity disruptions; understand weekend and month-end effects on bid-ask spreads; and use options on the CBOE Volatility Index (VIX) as a portfolio hedge. Unlike conventional guides, The Volatility Edge in Options Trading doesn't rely on oversimplified positional analyses: it fully reflects ongoing changes in the prices of underlying securities, market volatility, and time decay. What's more, Augen shows how to build your own customized analytical toolset using low-cost desktop software and data sources: tools that can transform his state-of-the-art strategies into practical buy/sell guidance.An options investment strategy that reflects the markets' fundamental mathematical propertiesPresents strategies for achieving superior returns in widely diverse market conditionsAdaptive trading: how to dynamically manage option positions, and why you mustIncludes precise, proven metrics and rules for adjusting complex positionsEffectively trading the earnings and expiration cyclesLeverage price distortions related to earnings and impending options expirationsBuilding a state-of-the-art analytical infrastructureUse standard desktop software and data sources to build world-class decision-making tools

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