The Handbook of Pairs Trading : Strategies Using Equities, Options, & Futures (Hardcover)

by Douglas S. Ehrman (Author)
Key Phrases: Bollinger Bands, United States, Managing the Trade After (more...)

Editorial Reviews

Product Description
Learn both the theory and practice of pairs trading, why it is consistently profitable, and how you can apply the strategies in your own trading with this valuable guide. Author Douglas Ehrman covers pairs trading involving stocks, options on stocks, and futures contracts, and explains how this type of trading allows you to profit from the changing price relationship of securities. In addition to a comprehensive discussion of the theories involved, he also includes practical examples that will to help you put what you've learned into practice.

Douglas S. Ehrman is a hedge fund manager and a leading authority on pairs trading. He is one of the founders and the Chief Executive Officer of AlphAmerica Asset Management LLC in Chicago. He also served as the chief executive officer of AlphAmerica Financial, Inc., the company that operated PairsTrading.com prior to its merger with PairTrader.com.

From the Inside Flap
Pairs trading—and other market-neutral strategies—have been around since the organization of listed markets. Once used only by large institutional investors and hedge funds, this approach has recently been adopted by many individual traders looking to take money out of the markets.

In The Handbook of Pairs Trading, financial professional Douglas Ehrman combines his extensive knowledge and experience within this field to provide you with the tools and techniques necessary to successfully begin managing your own pairs trading portfolio.

Divided into five parts, The Handbook of Pairs Trading explores pairs trading from a variety of angles, each with the joint goal of illustrating both the general tenets of the strategy and presenting the particular approach that Ehrman believes to be superior to all others. In the first three parts, Ehrman explores the elements that make up the trading of equity pairs and the requisite skills that accompany that endeavor. You'll receive a brief history of this discipline, and then learn about some of the most important features of pairs trading, including market neutrality, arbitrage, and technical analysis. After exploring each of these three major components independently, Ehrman spends time pulling them all together—through Unified Pairs Trading Theory—so you can begin to integrate pairs trading into your own investment or trading style.

While pairs trading is easiest to understand when considering equities, the discussion of options, futures, and currencies in the final two parts gives you an expanded collection of tools by which to manage your portfolio. Here, Ehrman explores the application of Unified Pairs Trading Theory to these alternate asset classes and securities types, and takes you step by step through a series of trade examples across various asset classes—to both highlight the nuances of each and to solidify your understanding of the theory.

The Handbook of Pairs Trading clearly explains the theory and practice of this important discipline, and breaks down its strategy so you can gain a firm understanding of the underlying dynamics of pairs trading. Filled with in-depth insight and expert advice, The Handbook of Pairs Trading is a comprehensive resource for those looking to implement this proven and profitable trading strategy.

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Product Details

• Hardcover: 258 pages
• Publisher: Wiley (January 10, 2006)
• Language: English
• ISBN-10: 0471727075
• ISBN-13: 978-0471727071
• Product Dimensions: 9.1 x 6.1 x 1.3 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 2.9 out of 5 stars See all reviews (7 customer reviews)
• Amazon.com Sales Rank: #711,560 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

7 of 7 people found the following review helpful:

1.0 out of 5 stars Poorly written book -- , March 26, 2007

By	Michael Gutmann (Portland, Oregon) - See all my reviews (REAL NAME)

I found the text poorly written: VERY repetitious; overly general on basic trade methodology; then not enough specifics regarding pairs trading. Math formulas were given without sufficient explanation or application, as if the author was just filling space with them (and the fonts used for the math was amateurish and not up to math text typographic standards -- in some cases even making them difficult to read). I was quite shocked at the overall low quality of the book. John Wiley trade texts are often of uneven quality I'm finding, even though the publishing house is thought to have a good reputation. Don't waste your time or money on this one. (And I'm not being overly harsh or critical, either.)

10 of 13 people found the following review helpful:

1.0 out of 5 stars A Waste of Time and Money, August 4, 2006

By	segv (San Francisco, CA) - See all my reviews

The book "The Handbook of Pairs Trading" is innacurate, incomplete, vauge, poorly written, and ultimately fails to define a pairs trading strategy. The first three chapters are a bad summary of fundamental analysis, technical analysis, market-neutral invsting, and arbitrage. The author then presents his "Unified Theory", where he begins, "The pairs trading investment strategy is comprised of three central elements: the market-neutral element, the arbitrage element, and the technical analysis element". He then proceeds with Chapter 9, titled "Reviewing the Elements", which is unbelievably, an even-worse summary of the preceeding 8 chapters. The final section of the book, "Advanced Strategies and Examples", still fails to present a strategy for pairs selection or trading. Instead, it presents more tertiary review of basic finance knowledge, such as "The purchase of call option is the most basic strategy in options trading". This book is full of filler; yet another worthless volume in the long line of so-called finance books published by John Wiley and Sons.

It is amazing to me that that the same company can at the same time publish a book like "Pairs Trading", by Ganapathy Vidyamurthy. I consider Vidyamurthy's book the best published texts on pairs trading. Unlike Erhman's book, Vidyamurthy's started as a PhD thesis. Readers without a quantitative or scientific background will not find Vidyamurthy's book helpful. However, as pairs trading is inherently a quantitative strategy, the book is well suited to the target audience and is an excellent introductory text on the subject.

1 of 1 people found the following review helpful:

1.0 out of 5 stars AVOID !, April 2, 2007

By	A Trader - See all my reviews

This book is a rehash of an earlier book offered by the author's now extinct website/subscription-service. It is simplistic, repetitive and wrong. Avoid.