Customer Reviews

The Four Biggest Mistakes in Option Trading, 2nd Edition (Trade Secrets)

5 star:		(4)
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1 star:		(1)

 

 

This small, quick read drastically changed the way I view options trading. Most of my knowledge about options has been obtained from an academic background - courses about hedging and quantitative arbitrage. I always knew that options could be a powerful tool for directional speculation, but my attempts to master it were always defeated by culprits such as time decay.

It was refreshing to see that this author recognizes that the academic view of options is flawed thanks to commissions and liquidity. He writes from the perspective of a speculator. After reading this short guide, I learned that as a speculator I was committing these Four Big Mistakes of option trading.

The Four Biggest Mistakes recognizes that the real market behaves much differently than the theories presented in academic class. It covers four distortions in the real market not typically taught by academia:

1. Option volatility fluctuates, causing the option price to act totally out of relation with the underlying stock price
2. Lower Deltas also mean that the option is less likely to be in-the-money at expiration
3. Complex quant strategies are not fullproof; each complex strategy has a downfall
4. Quant arbitrage strategies typically do not work because of a finite bid/ask price (less-than-perfect liquidity)

These real-market distortions cause people to misunderstand how options work in reality and consistently suffer losses. To understand these mistakes, the book is concisely written in a format presenting 1) the mistake 2) why it causes losses, and 3) how to avoid the mistake.

This is the most practical guide to options trading I have ever read. It is explained in clear language, short, and will help you become a better speculator. I recommend it if you want a realistic view of the options market.

Experienced traders should already know what's in this book, but those new to options trading would probably benefit from reading this book early in their careers. The first chapter, on implied volatility, is very good and Kaeppel, unlike a lot of other authors, gives you an objective method for making judgments about relative implied volatilities, which can help you shape your trading decision. Prose is easily digestible and Kaeppel slams home his points. A quick read.

I had heard about this book, but did not read it until recently. A "MUST" for all new traders. It covers mistakes made by all - stocks, options, index, futures, currency, etc. Well worth the "investment."

This book is a joke. It should've been a pamphlet, because the pages could've been reduced to 30 pages-tops. The 4 mistakes can be found in any basic principles of investing in stocks, futures, funds, etc.

This is a short easy-to-read book that contains an awful lot of valuable material for its thin size. It explains why the vast majority of options traders lose money over the long-term (despite occasional big wins), and it explains what you need to know in order to even your odds. I highly recommend this book of you are thinking about getting into options trading, or if you are a beginning options trader who wants to do better.

There is big money to be made in options, but only if you are know what you are doing. This book can help you by showing you how to figure out which options have a greater probability of being profitable.