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The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets Hardcover – January 27, 2008

ISBN-13: 978-0132354691 ISBN-10: 0132354691 Edition: 1st

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The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets + The Option Trader's Workbook: A Problem-Solving Approach (2nd Edition) + Day Trading Options: Profiting from Price Distortions in Very Brief Time Frames
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Product Details

  • Hardcover: 304 pages
  • Publisher: FT Press; 1 edition (January 27, 2008)
  • Language: English
  • ISBN-10: 0132354691
  • ISBN-13: 978-0132354691
  • Product Dimensions: 9.3 x 6.3 x 1.1 inches
  • Shipping Weight: 10.4 ounces
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (48 customer reviews)
  • Amazon Best Sellers Rank: #165,264 in Books (See Top 100 in Books)

Editorial Reviews

From the Back Cover

 “Jeff's analysis is unique, at least among academic derivatives textbooks. I would definitely use this material in my derivatives class, as I believe students would benefit from analyzing the many dimensions of Jeff's trading strategies. I especially found the material on trading the earnings cycle and discussion of how to insure against price jumps at known events very worthwhile.”

DR. ROBERTJENNINGS,Professor of Finance, Indiana University Kelley School of Business

 

“This is not just another book about options trading. The author shares a plethora of knowledge based on 20 years of trading experience and study of the financial markets. Jeff explains the myriad of complexities about options in a manner that is insightful and easy to understand. Given the growth in the options and derivatives markets over the past five years, this book is required reading for any serious investor or anyone in the financial service industries.”

MICHAELP. O'HARE,Head of Mergers & Acquisitions, Oppenheimer & Co. Inc.

 

“Those in the know will find this book to be an excellent resource and practical guide with exciting new insights into investing and hedging with options.”

JIMMEYER,Managing Director, Sasqua Field Capital Partners LLC

 

“Jeff has focused everything I knew about options pricing and more through a hyper-insightful lens! This book provides a unique and practical perspective about options trading that should be required reading for professional and individual investors.”

ARTHURTISI,Founder and CEO, EXA Infosystems; private investor and options trader

 

InThe Volatility Edge in Options Trading,leading options trader Jeff Augen introduces breakthrough strategies for identifying subtle price distortions that arise from changes in market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques that every experienced options trader can use to study historical price changes, mitigate risk, limit market exposure, and structure mathematically sound high-return options positions. Augen bridges the gap between pricing theory mathematics and market realities, covering topics addressed in no other options trading book. He introduces new ways to exploit the rising volatility that precedes earnings releases; trade the monthly options expiration cycle; leverage put:call price parity disruptions; understand weekend and month-end effects on bid-ask spreads; and use options on the CBOE Volatility Index (VIX) as a portfolio hedge. Unlike conventional guides,The Volatility Edge in Options Tradingdoesn't rely on oversimplified positional analyses: it fully reflects ongoing changes in the prices of underlying securities, market volatility, and time decay. What's more, Augen shows how to build your own customized analytical toolset using low-cost desktop software and data sources: tools that can transform his state-of-the-art strategies into practical buy/sell guidance.

 

An options investment strategy that reflects the markets' fundamentalmathematical properties

Presents strategies for achieving superior returns in widely diverse market conditions

Adaptive trading: how to dynamically manage option positions, and why you must

Includes precise, proven metrics and rules for adjusting complex positions

Effectively trading the earnings and expiration cycles

Leverage price distortions related to earnings and impending options expirations

Building a state-of-the-art analytical infrastructure

Use standard desktop software and data sources to build world-class decision-making tools

About the Author

JEFF AUGEN, currently a private investor and writer, has spent over a decade building a unique intellectual property portfolio of algorithms and software for technical analysis of derivatives prices. His work includes over one million lines of computer code refl ecting powerful new strategies for trading equity, index, and futures options. As co-founding executive of IBM’s Life Sciences Computing business, Augen defined a growth strategy resulting in $1.2B of new revenue and managed a large portfolio of venture capital investments. From 2002 to 2005, he was President and CEO of TurboWorx, Inc., a technical computing software company founded by the chairman of the Department of Computer Science at Yale University. He is author of Bioinformatics in the Post-Genomic Era: Genome, Transcriptome, Proteome, and Information-Based Medicine (Addison-Wesley, 2004).

 


More About the Author

Jeff Augen, currently a private investor and writer, has spent more than a decade building a unique intellectual property portfolio of algorithms and software for technical analysis of derivatives prices. His work includes more than one million lines of computer code reflecting powerful new strategies for trading equity, index, and futures options.

Augen has a 25-year history in information technology. As a co-founding executive of IBM's Life Sciences Computing business, he defined a growth strategy that resulted in $1.2 billion of new revenue, and he managed a large portfolio of venture capital investments. From 2002 to 2005, Augen was President and CEO of TurboWorx, Inc., a technical computing software company founded by the chairman of the Department of Computer Science at Yale University. He is author of The Volatility Edge in Options Trading (FT Press, 2008), The Option Trader's Workbook (FT Press, 2008), Trading Options at Expirations (FT Press, 2009), Day Trading Options (FT Press, 2009), and Bioinformatics in the Post-Genomic Era (Addison-Wesley, 2004). Much of his current work on options pricing is built on algorithms for predicting molecular structures that he developed as a graduate student.

Customer Reviews

Overall, the book was easy and enjoyable to read.
G. Burnett
The Volatility Edge also gives options traders methods on how to better graph historical volatility and underlying stock moves.
A. Georgas
I highly recommend this great book for options traders as well as stock traders too!
bullseye

Most Helpful Customer Reviews

110 of 111 people found the following review helpful By Guy Cohen on February 15, 2008
Format: Hardcover
A friend of mine in the trading industry suggested I read this gem of a book ... within a single weekend I did just that ... and what a gem it is!

Jeff Augen has put together a fine body of work in this book within which there are some seriously valuable nuggets of information.

The volatility spike graphs are a novelty in this business that anyone studying and trading volatility should benefit from. Essentially what he's uncovering is "differential volatility", in other words whether the volatility is being caused by buyers or sellers.

Typically, falling prices (due to selling action) will cause greater volatility, but not always. Sometimes the volatility is caused by rising prices. By understanding the direction in which the greater volatility of the underlying is occurring, the trader is able to position trades more appropriate to that skew. For example if the spikes indicate that volatility is caused by buying action then the calls may well be undervalued in advance of the next spike up. The trader can then make a double whammy trade, correct in direction and correctly in volatility.

Other nuggets include Jeff's slant on expiration date and earnings cycle trading, and the concept of stocks pinning to the strike, all of which are essential chapters in the book.

You'll be a more knowledgeable trader for reading this book and you should become a better trader for sure.
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42 of 44 people found the following review helpful By Robert S. Riddick on May 5, 2008
Format: Hardcover
One of the few trading books that instructs the reader on when, where, why, and how to place an option trade that has an excellent statistical probability of success. His Standard Deviation Spike Graphs are useful in that they can help to identify (by scanning), and capitalize (complete trading plan)on profitable opportunities. There are many more useful bits of info. The author is a professional trader using the techniques he writes about; many of which I (20+ yr option student/vet) use, and can confirm that they work. He is also correct in stating that successful options trading is darn near a full time job. For new traders beware, his advice is geared towards bloodied experienced traders, so practice for a while. Micheal Jordan telling us his secrets on how he drove the lane against Jabbar, Worthy, and Rambus is useful but be careful during practice (a pull-up perimeter jumper might be lower risk at first). As always, any advice on trading without a complete trading plan will fail to help any trader. If you are close to making it, continue to learn all that you can while knowing that this book will definitely help push you over the edge into long term trading success. This book is a must for any trading shelf, and is a steal at this price.
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24 of 24 people found the following review helpful By bullseye on February 22, 2009
Format: Hardcover Verified Purchase
Why is this book so much better than all the other books on trading options? Why is it better than the two day, $3,000 seminars on trading options advertised on TV or on the Internet?

Three reasons: several trading strategies are clearly described; a new type of charting technique is introduced which allows traders to visually evaluate a stock's price performance and then use that information to structure a trade that has a statistical edge; and numerous unique insights are presented that I had rarely or never seen in any other book or seminar. Incidentally the charting technique can be used very easily by traders who only trade stocks and not options.

I'll briefly describe the trading strategies, charts, and insights in chapters 3 through 8.

Chapter 3: This is the most useful material ever presented in any book on volatility, how to illustrate volatility visually on a unique type of chart, and then using the chart to make trading decisions. The discussion of differential volatility (different volatility for upward price move than downward) is totally unique to this book. A trading strategy is presented on trading cycles in volatility, which is visually illustrated in the context of gaining an edge of standard option pricing models.

Chapter 4: I was not aware that bid ask spreads could chew up so much of the profit from complex trades. I also found the best discussion ever on how short-term volatility swings affect option prices.

Chapter 5: First, a superb trading strategy is presented based on Augen's unique price charts. This strategy, based on a reversal of when price moves a specified number of standard deviations, as a trigger for entering trades, can be used very profitably by traders who only trade stocks.
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38 of 41 people found the following review helpful By Maxim Ross on March 27, 2008
Format: Hardcover Verified Purchase
An excellent book, with some novel ideas and concepts not covered in other books on options. Specifically useful are the following discussions:

- standard deviations and volatility charts
- discussions of liquidity and volatility swings
- hedging with VIX
- trading the earnings cycle
- trading the expiration cycle
- excellent coverage of all the main options strategies and spreads

Not a beginners book, and a year or two of decent options trading experience is recommended to get a good grasp of the concepts, but thats
great as there too many beginners book out there, all mostly the same!
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