Customer Reviews

The Complete Guide to Option Selling

5 star:		(12)
4 star:		(4)
3 star:		(3)
2 star:		(1)
1 star:		(1)

 

 

A good read for those interested in trading options from a "net seller's" position. But a "complete guide" it ain't. Far from it.

The view from the authors is very narrow and they make unqualified assertions that their perspective is the only possible way to trade options profitably. (There are many professionals who make a living operating from a net buyer position as well.)

I really believe the authors completely skip the over any discussion of winning trading principles and focus soley on an argument for selling vs. buying options. There is risk both ways and the lack of a proper risk management discussion leaves a glaring hole in an otherwise good book.

Too much emphasis on selling naked positions. Spreads are briefly discussed but the only one recommended is a ratio write which still leaves exposure to naked positions. Eventually the worst happens in all types of trading, and those with naked short exposure holding overnight positions in options markets will experience something between a serious setback and complete ruin when it does.

It's a well-written and enjoyable book, but take it with a grain of salt.

I'm relatively new to option trading. I've been stock trading a while and was curious about options so bought the book 'Fundamentals of the Options Markets.' It totally fascinated me -- couldn't wait till the end of the day so I could spend a few hours studying.

Then I was browsing in a bookstore and saw 'The Complete Guide to Option Selling', and thought, "...this can't be right...the other book said selling options is too risky." But, since the book also covers the futures market, and I was interested in that, I decided to get it.

It's very well written and informative on both options selling and the futures market. The authors present a contrary view of the traditional view of 'limited risk' options trading, such as long spreads, straddles, etc., contrasting it with the 'potential unlimited risk' of selling short options. The main gist of the book is that selling options well out-of-the-money on futures options can yield high-probability winning trades (70% or higher), while good risk management can keep losses to a minimum.

The book is a little self-serving in that the authors run a brokerage firm, and try to steer beginning option sellers toward using a full-service broker rather than going it alone. But, it's not a hard sell, and they may have a point.

I haven't attempted using their methods yet but plan to in the near future.

If you are interested in option selling strategies, this is a very helpful read.

The authors advocate selling far out naked options. Far out means far out of the money and far out in time (3-4 months). The argument is that one standard deviations 30 days out is more likely to be hit than one standard deviation 90 days out even though, statistically speaking, the odds are the same. While I believe this is true, it is not very practical for stocks because the 3-4 month time horizon will usually include an earnings date. This is probably an unacceptable risk on naked options where your exposure is great. On commodity contracts your risk is lock limit days.

If one were to hold a far out naked short option until expiration, it is a high probability play. However, the authors suggest a loss limiting strategy that would get you out far before the short strike is hit. This severly decreases the high probability advantage.

The authors stress knowing the fundamentals is important. Your short position is taken in favor of the fundamentals and the strike is far enough out to survive the noise of the markets. Fundamentals do play a large role in commodities.

All in all, this book presents a reasonable strategy and a good honest discussion of the process. However, taking the stop loss approach into account, the risk:reward ratio of the approach is too much for my taste. I will stick to the more "complicated" lower risk trades selling options on stocks.

This book was not a waste of time or money and should be a part of your option selling education.

I initially purchased this book believing that it would provide me with some new insights on "equity" option trading. Although the book does discuss stock option trading, the majority of the book is dedicated to futures options trading. I have had signficant experience with some of the strategies mentioned in the book such as selling puts and calls on stock based options. However, I had never been exposed to futures options trading. This book helped me to add futures options as a new tool in my own trading and investing program. The authors do a great job of providing an overivew of futures options trading and identifying key fundamentals for various commodities. I found this book to be extremely insightful and written in plain english without an over-reliance on overly technical options jargon, which plague many other books written on options. Overall, I would recommend this book to anyone who has had success in writing options and wants to expand their arsenal of potential strategies.

for traders who use option selling strategies this is one of the few books available, because the commun bias toward selling options is generally negative. The authors take a very strong position about the convenience to sell options and this is encouraging. Very interesting is the idea about seasonality and they perfectly illustrate why this factor is so relevant. Also brilliant is the review of the different selling options available because every trader can have a specific inclination towards one of them. What I was expecting was a chapter dedicated to how to build a plan for selling options. Pity one cannot find this issue in the book

Definitely one of the more worthwhile option trading books I have read (which is many). I have since adapted their strategies successfully which is why we all buy these books and why I give it 4 stars despite some oversimplifications. The book covers the misconceptions of selling options and they steer people away from short options on stocks which is a lot riskier than futures or index options. The general argument for selling over buying is that it is easier to say where the market isn't going to be during a certain time period than where it will be within that time period (although the losses for being wrong when short can be a lot more than being wrong when long). Good coverage of money management and risk control and seasonal aspects of futures. Bear in mind the book is in large part a sales promo for their brokerage service (they pretty much say they won't answer questions from non-clients), but many option books are. It is a very straightforward book and they intentionally do not go into the mathematics of option pricing which they justify well.

Some negative comments would be that they are suggesting a fairly strong level of fundamental analysis is required to determine a market that isn't going to move against your sold option in the near term (3 to 6 months). I don't know about you, but if I could be confident in near term market direction any strategy would be easy. Their argument would be that with selling options you don't need to be as accurate, but with a stop of buying back your option if it doubles in my experience you will be stopped out an awful lot of the time, even when trading with the trend. A spike in IV can really increase the value of those longer term OTM options. And consistently determining trend is still a judgement call that most traders don't get right.

Also, whilst they acknowledge that 80% of sold options don't really expire worthless (most of them are actually closed out prior to expiry) they seem to then keep using that 80% figure to justify their selling argument.

Having said that, I certainly agree that it is a lot easier to make money selling than buying options, with strict risk control, money management and not selling options on individual stocks as critical for new traders. As with any book on options you still need to test and develop your own strategies, but this is great first read for anyone who plans to be on the dark side (I mean short side).

I have read this book three times and have even used the authors firm for some of my investments. The book focuses on one topic that many option traders overlook - the potential for profit versus the probability of profit. Many option traders like to buy options because of the limited loss combined with the unlimited potential gain. What they overlook is the probability of attaining that profit. By turning things around and becoming an option seller you increase your chance of winning (since a majority of options expire worthless) at the trade-off of limited profit and potentially unlimited loss. They try to mitigate this risk by selling very far out-of-the-money options which have a minuscule chance of being exercised. With futures, you can sell contracts 50 - 100% above the current prices and still receive good premium. Also, as they mention, you can limit the risk by offsetting your naked option by purchasing a further out of the money option and creating a spread. Not only does this limit your risk, it lowers your margin requirements in your options account.

It is true that the authors focus mainly on naked option selling since this is how they invest most of their managed accounts. However, they are assuming that you will use a broker who will have the ability to watch your account and manage that risk for you. For a self-directed investor, other risk management techniques would be needed. I recommend "Options on Futures" by John Summa and Jonathan Lubow or "Trading Optures and Futions" by Joe Ross for a more complete discussion of option trading with an emphasis on risk management

A great book (perhaps the only book) on option selling. Very logical and practical techniques.

The book basically only discusses how to sell far OTM options. Was expecting more a market maker perspective, how to hedge/manage your greeks/adjust your positions etc.

Having said that, the book offered some interesting insights and the strategy actually works reasonably well.

Half of the book is a discussion of various commodities market which isn't very useful to everyone (at least to me as equities guy).

This is a very good and very practical book. Although it is focus on option trading for future market, but it is certainly very helpful if you only trading option for stocks. I wish I have read this book a lot earlier.

It is not a book trying to be the "bible" of the option, and it is not for people just want to day trading. It is book for people like to bring in income confidently, month after month.

Everyone likes to have higher probability to profit in each trade should read this book.