Customer Reviews

Options Trading: The Hidden Reality ("Options: Perception and Deception" & "Coulda Woulda Shoulda" revised & expanded, Printed in Color) ("Options: Perception and Deception" & "Coulda Woulda Shoulda" revised & expanded, Printed in Color)

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I wanted to comment on my experience with the book and some of the other customer reviews.

You do not need to be a market maker or veteran options trader to read and get value from this book. I am a retail options trader, with a very serious full time job, and have virtually no mathematical aptitude, and I have already started benefiting greatly from the book.

In my opinion you should make sure you have basic familiarity with how options work, and some of the basic outright positions and spread techniques and what market view they support, and you will be ready to start learning what options are really about from there. You cannot go wrong by using this book and Mr. Cottle's other materials as the very next step.

Be under no delusion---after the basics---options can get very complicated very quickly--if you let them. I have discovered, contrary to my initial impression, that Mr. Cottle in fact through the use of detail is really attempting to simplify option strategy decisions and trading itself. Through the use of what seems to be complicated examples---CC cuts through the fog and gets to the meat of options strategies and how and why one might choose one over the other--and invariably the best choice is something straightforward.

Based on what I know about him and my experience with his materials, he is committed to teaching. If you expect to read this book without pen and paper in hand, with little or no effort on your part, and have him simply say "do x and you will get rich" this book and his approach is definitely not for you. He is like any good teacher. He will make you work for the answer, but not leave you hanging when you struggle. In working for the answer---and having his approach, experience and techniques available--you will most assuredly gain a grasp of options and how to make money trading them that you never had before.

Don't be intimidated when you first view the book. The presentation looks strange, the tools he uses will be different from those you have seen or used before, and the terminology will be strange to some. There is a reason he takes the approach he does and it will, with a modicum of effort, become clearer every time you are exposed to it and use it.

Here is what it has done for me.

It has forced me to actually think about what may be happening underneath the option quote and the day to day change in a position.

It has convinced me that trading outright positions whether short naked or long does not necessarily produce the best results. Yes longs are problematic due to all the standard theta reasons, and yes naked shorts are risky---we all know that---the trick is to figure out how to take the inherent advantages of either of these approaches, and make them work for your view of the market without getting killed in the process.

What he has made me a believer in is that risk can be reasonably controlled, while still making very attractive rates of return, and if you are looking for a method to make reasonable returns in the market, the raw tools are there for the taking.

He has convinced me that uncomplicated but well constructed spreads, for debit or credit, can actually allow me to participate in the market with a reasonable expectation of success, and allow me to sleep at night in the process without position adjusting every 10 minutes. He has also made me a true believer that options, by their very nature, provide huge flexibilities that outright underlying positions cannot, and allow much wider margins for error if I prove to be wrong in my view in any given position if they are structured correctly in the first place.

You do not have to be a rocket scientist to make money in options. In fact if you arbitrarily go out and sell an option this afternoon at random, odds are it will expire worthless and you will make money. The problem lies in the odds piece that is not in your favor. You also do not have to be a rocket scientist to get killed by these odds. Although small in most cases, when it goes against you---you will be dead unless you are very savvy and well prepared to deal with such an eventuality. This is the piece that CC is so good at getting at--managing the underlying risks in any given option situation, structuring the position correctly and buying or selling it right to hold as much risk as possible in check--while still giving you the opportunity to make some money.

The thing that finally made me a believer was the time he took to talk to me. He is not a prima donna. When I had concerns about spending even one more nickel on books, learning materials, educational seminars, etc. because so much of what I spent has been a waste of money and merely kept the educator in new Mercedes for so long---CC came through with flying colors. He took almost a half hour and spoke with me on the phone, and since then has never failed to answer a polite note or inquiry in his forum on his website Riskdoctor.com. He certainly is not getting rich from my buying the book or a seminar tape as his prices are very fair and honest. All these factors have convinced me that he must have the true teaching bug and his desire is to teach and help me improve.

He is not an easy taskmaster--and he is not going to tell you what to trade. He is a good teacher and like any good teacher he always tries to stay out in front of you a bit with his teaching and materials. This is a good thing for those willing to stretch just a little because the nuances start to emerge very quickly. The best part is he is there to get you untangled when you do get stuck in the weeds.

One more thing, after you read through the book once---go on his website and spend a little money and get one of his taped training sessions that he has actually done with live students [I started with Straddles and Strangles]. It will DEFINITELY help you clear some of the confusion that the book will inevitably create.

If you want to know more about options than any of these get rich books can ever tell you--buy the book---it will pay for itself many times over in your first couple trades, and the bonus is you will understand why it paid for itself, rather than your just having made a lucky guess or two.

DDK

First I need to point out that i know the author and worked with him on the floor of the Chicago Board of Trade during the late 1980's. Charles was a superb trader but is an even better teacher. Options can be daunting because of all the associated terminology. This book will give the motivated reader numerous tools for understanding and choosing strategies for using options to control risks and achieve trading objectives. I know of no book that better serves a user of options as opposed to those whose interest is theoretical or academic.

This books differs from other books in that it presents not only the profit stories but also the stories about how certain positions lost money and why. The 3D risk graphs in color are great and after looking at them for a few minutes a flash bulb goes in your head making your understanding of options better. Detailed examples of advanced strategies like gamma scalping helps an intermediate retail trader to pickup and start using these strategies. If you are serious about options trading this book is a must have.

This book is very unique in that it covers material not covered by any other author that I've seen. I've been trading options since 2002 and it wasn't until I read this book a year or so ago that I was able to make a quantum leap in my trading. The book may not be an easy read. So it needs to be "studied" carefully over time. Parts of it should be read a few times, studying the illustrations in detail. But it will be well worth the effort.

In order to make this review as useful as possible, I'll discuss what skills I've gained from reading this book and what you can expect to gain by reading and absorbing the material:

1. You'll learn about synthetics and position dissection. This will help you evaluate any option strategy that anyone out there should throw your way (or you come-up with) to determine the risk/reward and pros/cons of it in an objective way. There are many educational firms that sell strategies. Charles Cottle's book will help you break them down to see the precise risk/reward characteristics that cut through the hype.

2. You will be able to understanding whether adjustments to option positions make sense or not. There is a lot of debate whether you should adjust positions or not. This books will answer those questions for you. It will also help you evaluate which adjustments do and which ones do not make sense, given your position and your market opinion.

3. As the subtitle implies, it will help you see the objective, but often hidden, reality behind your position and adjustment decisions. One very common problem is self-deception in creating/managing complex option positions - either subconsciously or due to lack of knowledge. By understanding position dissection and synthetic relationships between different positions you will be able to see through the complexity and make more informed decisions.

4. You'll gain a deeper understanding of option risks, greeks, volatility skews, and option pricing in detail (effects of dividends, interest rates, volatility, etc.)

5. The book will also apply the concepts of dissection and synthetics to understanding common option structures: straddles/strangles, verticals, wing-spreads (butterflies, butterfly variations, condors, etc.), and multi-expiration strategies (calendar, diagonals, etc.). This will help you explore each type of structure in greater detail and in ways that I've not seen anyone else do.

6. You'll learn how to create, apply, and adjust strategies in ways that are in sync with your market opinion. A very common problem is that we create or adjust into a position that directly contradicts our opinion of the market. Most often we're not aware such contradictions.

7. You'll learn about the Slingshot Hedge (TM). A strategy that takes the concept of the collar (i.e., vertical spread) and removes the negatives by creating a limited risk / unlimited reward / theta positive risk profile. You'll learn about some variations of the Slingshot and some concepts regarding it's management.

Here are some more specific examples of what can be learned from this book:

1. Why a 'credit' spread' is not necessarily better than a 'debit' spread.
2. What is the downside to using LEAPs in calendar or diagonal spreads.
3. How to find an options-only position for any stock+options position that you could imagine (ex. collar). This will save you from having to purchase stocks, when there is no need for them.
4. How to lock-in profits in your single option or spread position using adjustments.
5. Is legging into a position a good idea? If so, what's the right way of doing it?

As a great supplement and support for the book, I would recommend the Risk Doctor forums (www.riskdoctor.com). There are many questions/answers there with regards to any aspect of options trading, including a special forum dedicated to this book. Charles Cottle is one of the most gracious educators I've come across. He answered ALL questions and does not hold anything back in his answers. Many answers are very detailed, complete with screenshots. In case you don't hear back in a couple of days, you just have to email him directly when you post a question, to let him know that there is a new entry in the forum.

After several false starts, I started studying options seriously a few months ago and burned through a lot of books I had seen recommended in various place. Some were fairly good, some not, but I feel they all pale in comparison to this book. Charles brings clarity to this often obfuscated field, and for the fisrt time I feel I have 'grokked' options.

Parts of the book are not an easy read and have to be worked at before things click, but when they do you know you have really learned something new. Other parts of the book are fascinating stories of what can go wrong (very very wrong) when trading options. It's hard to imagine many authors spilling the beans on some of their really bad trades as honestly as Charles has. He also recounts some really brilliant trades he has made. The key is that the disasters were not in accord with 'the hidden reality' of options, whereas the victories were taking advantage of it.

I've been trading for over five years and have a library full of trading books. Cottle's book is one of the top four that I own. This book stretches your mind more than the others do. In the preface, Charles gives you a trading question you have to think about. The book keeps pressing your limits as it goes immediately into topics I thought were only useful to market makers... locks, conversions/reversals, put-call parity etc. I never have seen option synthetics explained the way Cottle explains them in his book. Now they are crystal clear and it's trivial to realize when you are looking at identical positions just structured differently (eg. naked short put = long stock + short call). So when someone wants to do a covered write, ask them to just sell a naked put instead and see if they cringe. If they do, they don't understand that the positions are identical and they need to read this book ASAP!!

If you think this stuff is only theory and not practical, think again. I had a futures options trade on 30 year treasury bonds. Part of the position had some puts and calls near the money and two different strikes. Once the price of bonds moved away from one of the strikes and the calls were in the money, the bid/ask spread widened so it was untradable (1.00 bid/5.00 ask for instance). Instead of taking a huge loss on closing trades with the open positions, I bought the box with in-the-money options and created a riskless position that closed the trade out when I setup the box. I wasn't aware of how to do this until I read this book.

The print is superb. The color charts are magnificent. And the content priceless.

If you are a beginner, don't start with this book. This hits the ground running and doesn't look back.

BOTTOM LINE: If you trade options and aren't afraid of some mental exercises and work, buy this book! It can only help your trading.

Charles really does pick up where a lot of other authors leave people hangin. The information in this book has really transformed my trading and my options awareness. He's not re-hashing the published works of others traders/authors here, his material is dense with lots of information related to his personal experience in the trading pits and the lessons learned while training many, around the world to become pit traders.

For people that are new to Options, this book seems like drinking from a fire hose. I, myself, am reading OTTHR for the 4th time. Charles really doesn't hold back.

Overall this is an excellent book with lots of good information for someone who is serious about trading Options. It may take a couple of readings to lock-in the concepts but it will not leave you "hi and dry".. Let me add also, that books of this caliber is not just for market makers.


$eaTrader

When you start reading about option trading, the first few books you run into seem to be so enlightening that you generously give them a 4-5 star evaluation on Amazon.
Then, as soon as it becomes visible to you that the "get rich quick" paradigm does not apply to options, you learn to better select your favourite authors.
Finally, you shore to Charles Cottle's book(s) and, despite you 3+ year studies in options, you start to question yourself whether the study efforts you spent until then were worth their while.
This book is neither an easy read, nor a quick recipe to master options. It is a book that deserves study, hard study, no shortcuts, as Charles himself wrote in his dedication on my own book when I visited him in his office in Chicago.
The author starts giving the reader a very fresh (unique, as far as my experience goes) perspective about option positions analysis through the so called "dissection" aimed to alter the trader's perception of his position and to better understand and measure risks.
After this, the book goes through analyzing in a tad more traditional way nuts and bolts of options: greeks, IV and various nuances like dividends, exercise, etc.
From Ch 4 on, the book goes deep into analyzing the 4 pillars of option trading: Verticals, Straddle and Strangles, Wingspreads (butterflies, condors, etc.) and Time Spreads. I found those chapters to be insightful and refreshing, giving the reader a lot of new perspectives on topics (e.g. the butterfly spreads) oftentimes neglected by other authors.
In the final chapters, the book discusses the volatility skew (challenging) and some insight from market makers (very challenging, at least for me)and closes with a gem on hybrid hedging techniques created by the author.
In closing, I think that if there is one book you must not read but master if you want to deal with option trading, this is the one.
Mr. Cottles' unique way of teaching never tries to let you think options are easy; he'd better try to discourage you from going ahead than letting you think to that 100K BMW your are going to buy next month, with the proceeds from your option trading. This is something that, at least in my experience, is very hard to find in the trading teaching and mentoring arena.

After 3 full-time years(of 13 yrs investing) of studying, extremely frustrating full-time study and searching, as a trading student, I found this book "OPTIONS TRADING: THE HIDDEN REALITY" by Charles Cottle. This guy seems a little like a saviour to me, [he cleared the confusing fog and fears supporting my uncertainty] after putting so much trust in other highly rated books and programs. I had hoped the other authors would have had the same skills, insights and experiences (credentials) this man, and his team, actually possess and demonstrate!

I nominate the RISK DOCTOR as "KING OF OPTIONS EDUCATION"! I think!: This book will become THE "options trading BIBLE"! (Out of 60+ best options books, DVDs & reports I've reviewed. This review is obviously over the top, but I love the way his materials are engineered, they deliver, BIG TIME!)

1. He has trained 1,000's of options market makers all over the world - very few have the multi-levels of experiences to handle those challenges! The RISK DOCTOR TEAM, of retired floor traders, have been where few others have. Plus, they're still consultants to the professional traders.

2. His years of experiences as a successful market maker at CME (futures) and CBOE (equity derivatives) supplied his unique insights, and qualifications as a market maker teacher, and now as a retail trading teacher.

3. He developed "CUP of Synthetics", "OPTIONS METAMORPHOSIS" and other "proprietary" tools (like DIAMONETRICS) to help us cut the hassles and wasted time out of our options analysis, chart analysis and risks analysis, their POTENT, check'em out! With these tools, I'm becoming more resourceful!

The RISK DOCTORs proprietary set of tools, for education in risk analysis, helps you make rapid, on the spot, risks analysis and costs evaluations in seconds (without depending on software)! If your gonna trade options, don't pass this book by, it's worth it's weight in GOLD!

4. He developed the "most potent" set of retail traders educational materials in existance. Reading and learning and communications with the RISK DOCTOR has effectively cleared up my confusions, fearful uncertainties from too much conflicting information overload.

5. He demonstrates qualities of character on the phone you'd expect from a master of options. He'll help you see inside of risks, like covered calls (most popular strategy) risk profiles, like no one else mentioned before(Their equivalent to a "naked put" risks, I've never new that). He says, "don't take my word for it, prove it, here's how", and he can prove it! Only two other teachers ever said that before!

If you don't believe me, visit [...] and read some of the comments, and listen to some of the free videos. OT:THR is where I wish I had started, it would have saved me a ton of money($10-12k), frustrations, and disappointments(4-5,000 wasted hours of study) because it's so far ahead of everything else in the options risks education universe.

I sure got surprised by the content, by his perceptions, and then depressed while discovering this guy has been available to retail traders since 2001! This new updated book is recent though, so I couldn't find and evaluate it before last year. I failed to search in the right places. Like Charles told me in an e-mail yesterday "better late than never"!

After reading the book, you've got to watch FOO(Foundation of Options), which you can find at [...] , the next one I'm working on is OPTIONS METAMORPHOSIS. OTTHR covers more ground, more effectively than any book or program I've read, or watched in 5-6,000 hrs, covering everything I had curiosities about in equities, currencies and options.


No longer confused and frustrated in Okc

This book is among the best I have read on trading options. While it is amazingly complex with charts and graphs that will leave many readers wondering what they mean. The real core of the book is exposing the synthetic matches between option pairs. It really opened my eyes to to the underlying dynamics of options that I never really thought about.

For example the beloved covered call, what is safer than simply generating income off a stock you already own? That is so safe as opposed to the risky short put that is hard to qualify to even trade with most brokers. Well, news flash, they are the same trade. In a covered call you get paid a small time value to take on the downward risk of your stock that you own. In a short put you collect a small time value fee to take on the downward risk of a stock you must buy at the strike. It is the same trade, same risk. Also a married put is the same as a long call option. In a married put you get the full upside and protect the downside by paying a small fee. In a call option you get the full upside while the downside is the small fee for the option. This book explains many of these synthetic equivalents in the option world. Very eye opening for some option traders not familiar with these concepts.

The book takes the reader through many option trading strategies and shows the importance of managing risk in all these plays by buying and selling legs to adjust the trade as it trends.

The book has all the typical trading advice of trading small when testing out new systems. The author also suggests that the reader think of option plays in the most simple terms possible. (Like an iron butterfly being two naked puts being protected by options.)

Great book that explains option plays, what the market needs to do for the specific play to be profitable. It also explains if you are long or short gamma, or long or short theta, long or short price etc. in your play.

This book will be on the top shelf of my option trading book shelf.

The author advises:
"Long-term consistent winnings in the market have much to do with taking profits".

I advise:
Long term success in trading options starts with reading this book.