Customer Reviews

An Introduction to Options Trading (Securities Institute)

5 star:		(3)
4 star:		(0)
3 star:		(1)
2 star:		(1)
1 star:		(0)

 

 

This book is a truly excellent options introduction. I have used it as a complement to both Hull's text and Wilmott's text, and it has really solidified my understanding. de Weert ties together and writes in a more easily digestible form the take home points from the other more technical books. I highly, highly recommend this book.

As a professional equity options trader I recommend this book to all those wanting to make a start in the world of options trading but realise the importance of a good theoretical grounding before risking their hard earned money. I recommend this book to all the junior traders I have trained and worked with.

Mr. deWeert has lead the field with this book, cutting though the mathematical jargon and explaining simply the concepts which are so often over complicated. Bravo Mr. de Weert!

This book is the most powerful book on options as it makes the dynamics of options intuitive by focussing on its economics while at the same time providing the mathematics behind it. All this is achieved by using real life investment strategies as examples. The culmination of this book is that it shows the relation between all the Greeks and the profit of a delta hedged option. The book can easily be used as a manual for traders as it gives guidelines as to when to early exercise options and the correlation exposure of composite or quanto option to name just two examples. Any trader or sales man in investment banking should use this as a manual.

Given the other reviews of this book, I was very much looking forward to receiving this book. My disappointment was enormous. This book reads like a hastily thrown together Master's thesis that, with its multiple uses of examples directly from Hull adds little to the literature of options theory.

Although it has some basic mathematical material (high school calculus level exposition), these sections are sloppily written and often fail to define terms. For example, in Chapter 2 on the Black-Scholes formula, N(x) is stated as "the standard normal distribution" without defining the function. Now the normal distribution is well enough known, but there are different normalizations so how do I know which particular one he is using? Only later in Eqn. 6.3 do we see the derivative N'(x) written explicitly to define the normalization. But here there is a massive typo in the formula so it's not really a compensation.

But what's worse is that in spite of its title, the book has little practical knowledge to impart on how options are actually traded and how they actually perform under real market conditions. A very useful book would have presented real trading scenarios and tracked them through the gyrations of price and volatility to their maturity to show how REAL options perform in a REAL market. Instead, this book has examples with 0.02 shares of stock being bought in zero-profit 100% delta hedge scenarios - highly theoretical, in fact totally useless, to the real options investor. Chapter 10, "Several options strategies", reads like a sparse Chinese menu of options plays, each with a pathetically simple example that anyone can find in the most basic Wikipedia articles. There is no discussion of the actual situations that these strategies are used in, nor of the possible outcomes of each strategy with variable market conditions.

But my favorite "example" is on page 112 where De Weert poses the scenario "Consider an investor who knows that TomTom is due to come out with a statement that will be a real market mover." In other words, "Consider an insider trading scenario in which a criminal wishes to exploit illegal information..." It's just amazing how the corrupt culture of Wall Street has permeated even the supposedly academic treatises. Again, this example is useless to the real individual investor who can't possibly "know" such things. I guess if you're an insider trading criminal, this is the book for you!

I'm not an insider trading criminal. I'm a professional physicist. And if a student of mine submitted this as a thesis project I would feel generous in giving it a B- grade, based on the shoddy mathematical treatments and the almost laughable simplicity of the illustrations and plots used in the book. To be fair, other "introductory" options book out there are even more simple minded and useless to the technical investor. Why can't someone write a good book with enough math and REAL EXAMPLES to show how these things are actually used to make (and lose) money?

Be warned: you can lose a lot of money VERY quickly playing with options. This book will not help you AT ALL to learn how best to use these extremely dangerous financial power tools in the real world. It will show you the most basic elements of the Black-Scholes formula and has some worthwhile examples discussing the greeks and hedging, but for the most part I kept thinking this book was a rather light effort by an average mathematics student who was never allowed on the trading floor.

To me, the title of the book is misleading. Book should be titled something like, "An Introduction to the Theoretical/Mathematical Concepts Behind Options." If you're looking for trading strategies, this book does not offer anything that the intro page of an options website does. Save yourself some money, unless you're a math geek (not that there's anything wrong with that!)