Customer Reviews

The Mathematics of Options Trading

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

 

 

This book fails on so many fronts that space simply wont allow to cover everything. First off, the author commits the crime of not knowing his audience. He assumes that you know nothing about options and very little about math. He then proceeds to bore you in early chapters with math that isn't even required later on. What's the point!? Its not until you get half way through the book that you finally get into the real meat. By then, he's makes a huge leap from reviewing how you add 1 + 1 to suddenly assuming that you know 1st year college calculus all in the matter of 1 chapter. In short, he tries to appeal to all, but misses the mark. I am an engineer, I know math, thats why picked up this book!!

Technically, I have many issues. First off, he more or less states that when selling naked puts you shouldn't worry about a move greater than 4 standard deviations because they never happen. Well my friend, although moves such as these do not occur frequently, they do occur often enough that I'd be concerned about using such a stratedgy. I have real life data from the past year to back up my claims. All the author has is theory. Go ask anyone holding a naked put in a pharmacutical company that just got shot down by the FDA what they think of a 4 SD move. They happen.

The author then states throughout the book that these are his claims for how the methods that he presents should work, but he then goes on to say that they should be tested before committing any real money. What the heck!? Why publish a book only to say that you should do your own research to prove his methods!?

I've been waiting for such a book for years! All the other options books out there miss the point of expected value. This book shines on that front. What's the point of winning 90% of your trades if you're a loser at the end of the day. That's the power of expected value. For years I've thought that if I could only come up with a way to accurately calculate expected values on options, then I could turn wall street into my own little casino and retire early! Well, its not that easy!

I've been doing my own research for the past year on all the formulas presented in this book. I've analyzed 1,000's of positions every month on spread sheets with easily downloadable data. Word of warning, dont bet your house on the expected values holding up. Distributions of returns vary from month to month and they also vary depending on the length of time involved. These distribution profiles vary enough to screw up expected values. Distribution profiles also vary greatly depending if you're looking at a large cap or micro cap stock. Do your own research as the author warns and you'll see for yourself. Its been a very frustrating process because in theory the math should work and I should be rich by now, but in practice it doesn't work so well. It just speaks volumes to how difficult it is to make money long term trading options.

I haven't given up the chase yet as I am continuing on with my research, testing and tweaking. This book should be credited for pushing me in the right direction, but its disappointing that the book falls short on its own real world exhaustive research.

One of the best books on options currently available. Many books when it comes to the mathematics side of options, become very complicated, this is not the case here. It is well set out and easy to understand. Would highly recommend it be the first choice for anyone who is interested in or already trades options and may want a better understanding of the fundamentals.

If someone is looking for a basic understanding of the probalilistic nature of characterizing options behaviour without having sophisticated mathematical/statistical background this book almost uniquly provides that for you. Found the book's organization and clarity excellent with final set chapters bringing together all the lessons of early learnings very usefully expecially the calculations of the expected results for all common options strategies. One thing the reader needs to be aware of is that this book will not teach you how to trade options - there are much better books out there. After reading this book it will hopefully make you make a better decision on selection of the various options tools / strategies software in marketplace.

This book sits within easy reach on my bookshelf!

Today, there are so many books with the magical word "options" in the title that it is difficult to find the one that has the information you really need . . . to understand the fundamentals of options valuation, their trading strategies and their probable profits.

This book stands in a class all its own. It brings definitive clarity to the analysis and application of the cornerstone of all options theory - - - the Black-Scholes model. Detailed analyses of the basic option strategies are provided (buying and selling of Calls, Covered Calls, Puts, Protective Puts and Spreads - - - Bull, Bear, Ratio, Back as well as Straddles, Strangles, Butterflies and Condors). The results that can be expected from these strategies at expiration are also presented.

Two very useful programs are provided on a CD that evaluate the profit potential of these strategies given the current in- and out-of-the money option strikes on any underlying. These programs will be most accurate if the recent returns of the underlying are Gaussian distributed (well diversified ETFs, the S&P 500 or on any stock with a near-Gaussian return history). The author provides a sampling of some investment results that were achieved using these tools.