Customer Reviews

The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading)

5 star:		(9)
4 star:		(4)
3 star:		(3)
2 star:		(0)
1 star:		(1)

 

 

You should probably have a bit of experience before reading this book. It is not an absolute beginner's book. However the concepts are presented clearly and there are enough of them so it is likely there will be something interesting for most everyone.

You will need a level of mathematical sophistication necessary to multiply by two or three as well as addition and subtraction. This book contains no mathematical concepts beyond that level.

If you are looking for theory, keep looking as you won't find much of that here. Practicality is the hallmark of the book.

There have been thousands of books written on investments and options over the years. It would be quite hard to come up with much that is truly original. Instead the better books come at things from a different perspective. This book is certainly better than most on the subject. Here are some of the things that make this book different than most.

There is no super secret no risk sure fire rags to riches in 30 days plan presented. Instead there is an emphasis on trading should be looked at for what it is; a business. A healthy respect for risk is shown throughout the pages. The first chapter of the book is worth almost anyone's time as most people do not seem to realize they are in business when they call their broker or click on their order page.

Many options books present large numbers of P/L graphs on the various possible positions. This book is no exception, however they approach things from a slightly different perspective. Here much of the emphasis is on how to move from one position to another. They extensively cover many different changes you would want to consider making as the market or your perception of it changes.

Knowing the relationships between different postions is important for several reasons. First you can react quickly by having a good idea as to what to do in a rapidly changing enviroment where a few seconds delay can cost a lot of money. An even better use for this information is in forming your trading plan before you ever place an order. A third use is to avoid situations where there are no good adjustments if things do not go as planned.

The first negative that I found had to do with the length. In general having any 2 of the three building blocks (puts, calls, underlying) you can synthetically construct the other piece (indeed a large part of the book is devoted to this concept). The authors built a little more repetition into the book than I personally found necessary by doing the same analysis on mirror image postions. This is not a major downside as some will appreciate the review and others will simply skip a few pages here and there.

The second issue concerns the use of the terms free trade or risk free trade. The reality is the trade was not free and there is a price. The price may have been actual money, foregone opportunities, or increased risk. Sometimes the authors mention the cost, other times they do not.

An example of a not so free "free trade" would be to buy a call have the stock rise, sell a higher priced call for what you paid for the original. You now have a bull spread. This is free in the sense you now have a spread position at no cost. However it could end up costing you if the stock drops because the spread could become worthless and you could have sold your long call outright. The concept is good but I find the wording to be troublesome.

Overall I believe the money spent on this book was a pittance compared to the money made or saved by reading this book and I am very glad to have bought it.

The Option Trader's handbook is a bit more in-depth than most basic option trading texts in that it explains what to do to after you have entered a position. Unlike trading a stock or future, with options, there are many possibilities. Other books too often neglect the adjustment part of a trade.

Most option books describe various spreading strategies, but I know many novice traders complain about picking a directional spread (bull call or bear put), getting the direction correct, only to lose money because the spread still hasn't reached its maximal potential because of time value still remaining. This book tells you what to do in order to keep much of the profits without increasing risk.

Many of the tactics and adjustments described were alluded to in McMillian's _Options as a Strategic Investment._ But that thick tome occasionally left out a few points complete novices might not pick up. So if you trade stock, long options, or spreads, and want to figure out what to do to limit risk, this will explain things clear and simple language.

The author clearly demonstrates the beauty of trading options in addition to the underlying security. There are so many ways to repair a losing position, minimize, or eliminate the risk of loss, I am amazed that options have the risky reputation they do.

The one danger with all of these adjustments, however, is that you spend too much time on a trade trying to come out with a small profit, or break even. From a psychological POV, this knowledge could be dangerous in that you fail to admit a trade hasn't worked. Rather than take the loss, you make adjustments, and focus your energy on breaking even, rather than looking for a trade to make you whole, and then some.

One of the negatives--I was hoping the authors would go into more detail on various delta neutral trade adjustments. There was much discussion on adjusting long or short positions, but not much at all on diagonal spreads, or various types of ratio spreads.

Another issue--there is some advice that strikes me as mistaken.
The author advises selling an in-the-money call option on a stock you own to hedge against a decline while avoiding short term capital gains (p. 89). My understanding is that the IRS considers this a "constructive sale" and either you are taxed (if you get assigned) or your holding period starts over.

But aside from this, the book deserves a place on the shelf of every trader.

Is there a difference between learning and making money? As a professional trader my main goal now is to find practical ideas that make money. During my first year of trading , my goal was to learn as much as I can about the business of trading regardless of how profitable the information is. As I gained experience I started weeding out concepts and techniques that are not profitable.
My experience in trading has proven to me that simple concepts applied effectively work best especially in options. In this book most concepts while understandable are elaborate option strategies with frequent position restructuring to adapt to the market. While it is always good to adapt,frequent changes cost you commissions and reduce potential profits.
In addition success in option trading highly depends on the traders ability to assess the short term movement of the underlying stock using appropriate technical indicators. It would have been of great help if technical indicators used in assessing stock movements were combined with option strategies .
AS an example. let us say you are interested in selling a covered call on your stock. The most important peice of information is not how much premium you will make if the stock moves down by a certain amount by expiration and what position changes you will need to make if the stock goes up or against you.What you really need to know is whether the stock is about to reverse down, if that is the case you sell the call and plan to buy it back when the stock falls to a certain support level as indicated by your Stock technical trading system. If not then selling the covered call is a bad idea no matter what the P/L chart says.
If you are an academic type person, a professor, college student or someone who wants to learn , this is a great book and that is why I gave it 4 stars. If on the other hand your goal is actually to make money , you need to look to other books.One I found useful is"generate thousands on your stocks without selling them" by Elias.where the concepts are less academic and more geared to making money.

I'm an intermediate level options trader. I bought this book for the trade adjustments, and it definitely delivers. I was weak on how or what trade adjustments to make. Reading this book has definitely changed the way I trade. I now have multiple strategies for locking in profits, and repairing loosing positions.

This book isn't for beginners, it's really for intermediate level options traders. I think everyone will learn something from the trade adjustments in this book. Definitely worth the money and time to read it.

This book is not bad from the perspective of an overview of basic option strategies. I don't have any complaints but i also don't have any big compliments. This is one of many general option strategy books out there. My only big complaint is the cost -- i think the $60 list price is a bit aggressive compared to what you can get from competing books out there.

Bottom line: If you want to trade options, or are already trading options and you are not an expert, buy this book, and read it carefully.

I have looked at lots of option trading books, and bought and read quite a few, not to mention looking at MANY websites and even taking a personalized Option trading course.

This is, beyond doubt, one of the best and most useful I've seen.

Aside from the usual basic information which is a must-have in a book aimed at non-experts, which is done an a good, efficient manner, this book really shines in covering positions adjustments and discussing their plus and minus implications. Where "adjustments" are follow-on-trades to be done after you open a position, and then the stock behaves as expected, or behaves opposite to as expected.

In this respect, this book is almost alone in explaining what to do, and the implications of the action.

My one quibble is that a lot of the worked-examples are done in text, mostly, where a table-form or flow-chart presentation would be better, I think.

That said, I HIGHLY recommend this book

The other reviews point out the highlights of this book. I do think this is a worthwhile addition to any intermediate option trader, but I have to say if you are a net option seller there is little direct reference to your strategies. Still lots you can take from it, but not so much directly to your strategies. If you want to learn what to do when the call spread you sold is being threatened, you are not going to get a lot directly related to this. That being the case, buy and learn from it anyways as you will pick up or remember stuff that will make you a better trader.

I was quite dissapoined when I read this book. My high expectations of it didn't materialize. I cannot recommend this book to anyone who is serious about option trading since it does not discuss greeks and how you can balance your portfolio with them. If you spend time and research components of option pricing and greeks this book becomes just a common sense repeated a hundred times.

Most of the time when I buy books in the hopes of learning a thing or two about trading options, they are written at a cursory level and don't really add much new to the general pool of information. This book has me pleasantly surprised.
I have been trading options for a few years, mostly just buying or selling options or verticals. It was time to learn more. I also wanted very much to learn how to save a trade that moved against me when I wasn't paying enough attention. This was the one book I found that seemed to offer such information.
It's not easy reading, mostly because it is so in depth. But it's not mind boggling, just deserving of a little extra time and patience, and perhaps a re-read where the info won't soak through the first time. I think it has given me greater understanding of why my good trades go well and my bad trades don't. And it has made me feel ready to perhaps try some new strategies that I had a cursory uderstanding of, but now seem to make sense in the framework of the characteristics of the options being traded.
I think this is a must read for anyone beyond the beginner stage of options trading. It might be a bit much for anyone who hasn't got a little experience.

An excellent coverage of the strategy of option trades including a solid presentation of the fundamental trades. Particular presentations on what to do with a trade that is going bad is most helpful. You will find yourself making detailed sketches the risk reward plots on the side to fully understand the details of such positions as a bear call spread. It gives a depth of understanding that enables you to trade independently.