I have a friend I believe is a bit of a compulsive gambler who absolutely loves speculating with equity options. There is no ryhme or reason to his investment process which irrates me to no end. What I would like to do is buy him a book on trading equity options that is relatively accessable in terms of language/theory so he can learn a little about the risks he is taking and also help him improve his investment decision making. So are there any books on the subject that any of you would recommend? I’d also like to learn a bit more about fx and FI options in terms of their use in risk management for corporate entities and financial institutions so if you could point me in the right direction on that end I would be very grateful.
thanks!
Look FM, after many, many years, I got it working consistently now. The Natenburg book “Option Volatility and Pricing” is really a solid book, Bodi. The fckers on the NYMEX (the one’s who read books) swore by it. the others, were pretty much classic mafia.
Anyways, the Cyprus situation should help me get out of dinger.
I already put in my closing order for the gap down at open. Half closed, then let the rest ride, because everybody wanted an excuse to lock in gains.
http://www.youtube.com/watch?v=Wd2aeZhu9xY
Happy Irish day buddies.
I’ve always heard good things about the Natenburg book but I don’t have it. I have one by Greg Fontanills called “The Options Course” Fontanills’ big thing is Delta Neutral trading and combining Stocks with Options to outperform an all stock portfolio. There is also a workbook you can get with it which I always like. Another one I have is by a guy named Jeff Augen called “The Volatility Edge in Option Trading”. I really like Augen’s style; seems more refined and technical. His emphasis is on analyzing the implied volatilities since that is really what you’re trading with options anyways. He also has an Option Trader’s Workbook, which isn’t related to the Volatility Edge book but is still very good.
IMO I’d skip Augen, he wrote an entire book on a flawed premise (one about expiry) and makes up his own volatility metrics. Stick to the classics. Natenburg is good, I’d also look at Baird’s Market Making, and Sinclair’s Option Trading. If you just want technical/reference stuff look at Hull or Taleb.
^thats interesting about Augen, I wasn’t aware of that. What exactly was the flawed premise? Are you referring to the book he wrote about trading the expiration cycle? I haven’t read that one but I’ve seen it.
Yea, the gist of it is vol is 0 at expiry (duh), so there’s a collapse on expiration day so it makes sense to be short. It’s akin to thinking you can sell a straddle at EOD friday to capture the weekend decay.
Other gripes are he cherry picks trades as if it’s validation for his methods and presents ideas that are untradeable. IIRC he discusses some paterns on how IV moves within a 2hr window - given the spread/commission it’s largely irrellevant.
It’s probably not as bad as I’m making it sound, I just think the time is better spent reading books of higher quality.