Customer Reviews

McMillan on Options (A Marketplace Book)

5 star:		(19)
4 star:		(6)
3 star:		(1)
2 star:		(1)
1 star:		(3)

 

 

As a ROP (registered Options principal) I feel I am uniquely qualified to review this book. First, understand that Larry McMillan is considered by many to be the best options mind on Wall Street (sorry Bernie Schaeffer). His knowledge of this less-than-logical derivative investment is the equivalent of Alan Greenspan’s knowledge of the economy.

My assessment: this is a good book. McMillan covers virtually every aspect of options trading: history, terms, strategies, volatility, theoretical approaches, etc. I am particularly impressed by Larry’s use of historical examples to bring complicated strategies down to basic levels.

This is not to say this is an easy read. An easy investment read is Peter Lynch’s "One Up on Wall Street". McMillan on Options is more like a doctor’s guide to brain surgery: the pictures are cool but the content can be complicated. Topics covered include spreads (verts, calendar, diagonal), straddles, combos, the greeks (delta, rho, theta, vega and gamma) and strategies that employ these. If volatility is your life, and you hold a hefty position in Rolaids futures, then this book is for you. I have not read a more comprehensive, useable options book. I believe all options traders and speculators should own McMillan on Options.

Some of the negative reviews sounded like they wanted a short book that said "Do the following and you will be very rich very quick". Guess what, that book doesn't exist and will never exist. Options are very useful if used properly but to use them properly you need a deep understanding of risk and the mechanics of options. These concepts are mathematical in nature and so is this book. For a variety of reasons just buying a bunch of options is a suckers game as many have learned, but used to reduce risk as a hedge is a different matter. McMillan's other book Options as a Strategic Investment would be the place to start learning. This advanced text explains many things professionals are doing and gives insight to why the markets behave as they do. If you want to get involved with options you need to understand this book thoroughly.

"McMillan on Options" is a rare kind of book, and one of the very best. Especially revealing are the discussions in Chapter 4, "The Predictive Power of Options", on how certain patterns of option trading volume and implied volatility can be tip-offs to insider activity and sharp moves in the underlying stock, and on how to take practical advantage of such patterns. The chapters on trading systems and on how to trade volatility and the volatility skew were also well written and useful to the active options trader. All in all, I would recommend this book to anyone seriously contemplating getting involved in the options game.

In fact, "McMillan on Options" and "Options as a Strategic Investment" (a real classic, also by McMillan), were among the very few options books that I made reference to in my own recent work ("Advanced Option Pricing Models", McGraw Hill, Feb 2005)

Jeffrey Owen Katz, Ph.D.

Having never traded options before but having an engineering background, I found the text as dry as my college engineering textbooks, but as informative as ever. I finally got the hang of it by the last chapter, and found it more informative reading the second time.

I CANNOT IMAGINE TRADING OPTIONS W/O A FULL UNDERSTANDING OF THE CONCEPTS HE PRESENTS. It is not, however, intuitive to the novice options trader. It may take reading a second time to get the hang of it.

Lawrence G. McMillan is the author of the famous title "Options as a Strategic Investment". What's the difference between the two books? This one is entirely different: it teaches option trading in actual examples, and is not intended to be a complete definition of strategies. This is a book in which the application of options to actual trading situations is discussed. It assumes that you are already familiar with the stock market to some extent and have traded stocks but not options. There are plenty of real trading examples, many of them taken from the author's trading experience. In addition, there are a number of stories--some humorous, some more on the tragic side, that illustrate the rewards and pitfalls of trading, especially trading options. If you like the analysis of historic events in the markets, I can also recommend "The Only Three Questions That Count" by Ken Fisher, in addition to this book. If you like the history even more, I can recommend the trilogy: Financier, Titan and The Stoic by Theodore Dreiser. Seriously!

Pros:
- explains in a very interesting way the history of listed options and other historic events;
- humorous, vivid, entertaining and amusing;
- unique advises from the author's experience;
- uncovers the predictive power of options in a very detailed manner with lots of case studies
- analyses the seasonality of volatility, The January effect, Late-October Buy Point, and other patterns and dependences;
- excellent chapters about the trading philosophy;

Cons:
- Chapters about selecting the right broker, getting the quotes and understanding the order flow are outdated;
- An important technique of selling puts as a way of buying the underlying security is not covered in this book, but covered in the others first book "Options as a Strategic Investment". Warren Buffett obtains most of his stock holdings through selling puts. He got most of his Coca-Cola Holdings this way, and, recently, Burlington Northern Santa Fe. If you are interested in this technique, read chapter 19 of "Options as a Strategic Investment";
- Doesn't have a single references to other books.

There are many books about options, but this is a must read.

This book is quite easy to follow if one pays sufficient attention. The math content that is present in most books on options is kept to a minimum in this volume.There is a lot of great practical trading advice, especially in the section dealing with locked-limit moves. McMillan also shows the reader how to dynamically interpret the put-call ratio and implied volatility levels.Good information on OEX and SPX options trading as well. This is great book for both futures and stock traders and of course, for options traders.

Two things make this book very educational and useful: 1.) Several strategies and ways of using options that I never thought of. From ratio spreads to trading volatility, this book demonstrates how versatile and profitable option trading can be. 2.) Stories of how NOT to trade. These are both entertaining and effective at teaching the risks and rewards of option trading.

I really would have liked to see more mathematical formulas than the few in the appendix, and a supplemental web resource linking to Futures information and inexpensive option commisions would have made the book more valuable.

This is an excellent book. It has a logical progression and thoroughly describes option strategies from the conservative to the aggressive. My only suggestion to enhance the book's practicality would be to have an appendix showing profit and loss worksheets for each strategy. His website, The Option Strategist, has some useful option market commentary.

This book is a steal because it is the best introduction to the subject available. But even if getting into the EOE or OEX business was not your goal, you should still read it. Why? One. The structure of the book alternates between theory and practice. Dry bits and clear everyday real life situations alternate in a highly entertaining way. Two. If you ever think of writing a book yourself on a technical subject, any subject for that matter, turn to this example for guidance. The careful structuring, the pacing of the information flow and the lucid framework the text relies upon are what distinguish great learning from theory, inspired teaching from mere scholarly information. this man is a born pedagogue. Why no 10/10 score. The book should come with a diskette with Excel-examples.

I loved this book, written in a language that is easy to understand for non native speaking, like me.
A few points:

- this book is not for absolute beginners. Mr. McMillan indeed provides the basis for understanding options and the most known strategies, like spreads, strangle or similar. I would however direct the reader who is unaware of the basis to the other ponderous work of Mr. McMillan, Options as a strategic investment
- McMillan drives the willing reader to a thorough understanding of concepts/tools often misused, like volatility, put/call ratio, etc. Specifically, the third chapter is a truly inestimable (at least in my opinion) key to harness the predictive power of options.
- This is a no-hype book, if compared with the average of the sector. Mr. McMillan does not indulge or indulges only with tasteful sobriety in describing or promoting his professional services.
In conclusion:
Though if this book is not an easy reading, I would strongly urge the serious professional to read and re-read this book. It is really one of the few eye-opener books I've ever read in this domain.