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VINE VOICEon April 12, 2007
Guy Cohen lays out just about every option strategy that you could make work, given the right market conditions and your tolerance for risk. I would certainly put this book in the "Reference Book" category -- something that you would take out on occasion to answer a query about how a certain trade is placed or when it's a good strategy to use.

I started out with the intent of reading it from cover to cover. But I have to admit that I ended up skipping a lot of the material after reading the first 100 pages or so because it gets somewhat repetitious. So this indeed makes a good reference book, say, when you hear someone mention a "Long Put Condor" and wonder what it is. Or if you forget what market conditions (volatile, neutral, etc) would be required for a Bear Call Spread to work well. Also, I do appreciate Guy's organization of strategies by Risk/Reward, Direction, Volatility, etc. That makes it easy to get a short list of strategies given your own trading style and the market conditions.

What I found missing that I wish was there is information like how far from Option Expiry should this strategy be placed, what is an optimum range of IV for the underlying stock for each type of strategy, when should the strategy be repaired or exited? How do you repair it, or leg in or out successfully?

Also, I still do not understand what the little charts mean at the end of each strategy. I understand that they represent some kind of profile for each of the greeks, but there's no scale or indicators on the axes, nor can I find an explanation of what the dotted, dashed and solid lines mean. Maybe it's just me, since I've only been trading options for about a year now. If you're an experienced option trader, you'll probably know what they mean.
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on July 28, 2011
At first glance, I - like other reviewers - thought that Cohen had written a nice reference where one could quickly find an option strategy that matches market conditions. To a limited extent, the strategy table at the end of the book accomplishes this. If you want to trade these strategies, however, you will have to learn how somewhere else.

The axes of the six charts presented in each section are not labeled, do plot data and are too small to read. The chart captions refer to option strikes that are not shown on the charts. Neither are the break-even points that are discussed in the text. The volatility charts often show volatility swinging from negative to positive to negative (Volatility can never be negative, but since the axes are not labeled, I assume that is what he is trying to plot here); yet the chart caption only says that volatility is either helpful or harmful.

Also, the keys to the curves in the charts are inconsistent even though the curves appear to have been plotted for the same time frame. For example, on page 79 curves are plotted for options at "Expiration", "5 months to Exp.", and "1 month to Exp." while on page 60 the curves are plotted for "Expiration", "Today - 1 month", and "Time (t) - 5 days". I have no idea what the latter means.

The text is so full of omissions and errors that it is hard to believe that the people who endorsed the book (Bernie Schaeffer, Alpesh Patel and Price Headley) ever read it. Some examples follow.

In the examples of net credit trades (e.g., p.45) the author calculates a return on investment (ROI). There is no investment on a net credit trade.

The risk profile for a calendar call (p.63) has no key. What time period does this curve represent?

The example trade for a diagonal call (p.68) states that the short call option expires in the money (ITM), but does not acknowledge that as a result of holding short ITM call past expiration, the trader will be assigned a short position of at least 100 shares in the underlying stock.

As an example of a calendar put (p.73), the terms historical volatility and implied volatility are used interchangeable and both are said to equal 40%. Historical and implied volatility are distinct terms (the former refers to the stock and the latter the option), they are calculated differently and are rarely, if ever, the same.

The scenarios for a calendar put (p.74) correctly assume that implied volatility does not change. This same assumption should have been made for the calendar call (pp. 61-63) but is not.

The risk profile plotted for a diagonal put (p. 81) shows a maximum reward that is 100 times higher than the calculated value (p.80). Moreover, the actual values for net credits, net debits, maximum risks and maximum rewards for all the example trades in this book should be 100 times higher than what is calculated.

The example trade for a married put (p.88 - page not numbered) states that a stock is trading at 50.00 but is sold short at 49.75. How can you short a stock at a price that is below the current market value?

Throughout the book, Cohen instructs readers to "use online tools to find the optimum yields and breakeven points at and before expiration" (e.g., p.92). What are these online tools and where do we find them? He may be trying to say that before opening a position, we should find or acquire software that will plot a risk profile for that position at different time frames prior to expiration.

Throughout the book, the terms "net debit" (e.g. p. 96) and "interim risk" (e.g., p.105) are used interchangeable, but the book's glossary does not define either of them. Most traders know what a net debit means, but it is not apparent that net debit and interim risk mean the same.

In the example of a straddle (p.126) the breakeven points would be more helpful if they were further apart, not more narrow.

In the example of a strangle (p.131), the breakeven points are $1.30 wider at expiration, not $0.65.

Throughout the book (e.g., p.139) we are told to find an option whose implied volatility is very low, but the stock is about to make an explosive move. Only insiders have this sort of information, and if they are caught using it, they'll go to jail.

We are told to compare guts (an option strategy) to a straddle and strangle "using the Analyzer" (p.143). What is the Analyzer? It is not in the glossary or explained in the text.

The net debit for the example guts (p. 147) should be $4.20 + $3.80, not - $3.80. And the maximum risk is the net debit - difference in strikes, not the net debit - difference in premiums.

In calculating the net credit for the example short put butterfly (p.156), the premiums bought should total $9.66, not $9.64.

In the diagram for a sideways strategy (p. 176), if the middle strikes of a Long Put Butterfly are separated, the position becomes a Long Put Condor, not a Long Call Condor.

The puts and calls sold in the example of a short strangle (p. 185) are only one strike apart. No one in their right mind would make such a risky trade.

In the description of a long call condor (p. 198) the two middle options are sold, not bought.

The description of a modified put butterfly states, "This is a fiddly strategy and should only be used if you have an analyzer handy.." (p.212). What is a fiddly strategy and where would one find this analyzer?

In calculating the maximum reward for a modified put butterfly (p. 216), the middle strike should be $55.00, not $50.00; the net credit should be $0.98, not $4.02, and the maximum reward should be $4.02, not $5.98.

In selecting options for a call ratio backspread (p.221), the higher strike option should be one or two strikes higher than the sold strike, not the bought strike.

The rationale for a put ratio backspread (p. 225) should be that you are looking for the stock to fall significantly, not rise significantly.

The rationale for ratio call spread (p.230) states that this should be a net credit trade, but the risk profile (p.231) and example (p.232) are for net debit trades.

In selecting options for a collar, the put strike should be ATM or just OTM (p. 243), but in the example trade (p. 245), the put strike is ITM.

"Uncapped reward if the stock falls" is said to be an advantage of a synthetic put (p. 253). The maximum reward is actually capped at the stock price - call premium (pp. 252-253).

The maximum risk for a long call synthetic straddle (p. 256) is limited if the stock does not move decisively, not if the stock rises.

In trading a short call synthetic straddle (p. 263), the trader would buy, not sell, 50 shares for every call contract he or she sold, not bought. Also, you would sell two ATM calls per 100 shares you buy, not sell.

In trading a short put synthetic straddle (p. 267), one would sell two ATM puts, not calls, per 100 shares you sell, not buy. The put's OTM strike would be lower, not higher, than the current stock price.

In exiting a short synthetic future (p. 278), you cannot "exit just your profitable leg...". Both legs are either profitable or unprofitable.

I'M GLAD THAT THE OTHER BIBLE IS NOT AS SCREWED UP AS THIS ONE.
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on December 2, 2008
This hardcover should not be your first reading about options. It assumes that you are already familiar with options trading, and just want a reference book at hand.

For each strategy, e.g. "Short Iron Butterfly", there is a description, context (outlook, rationale, net position, effect of time decay, appropriate time period to trade, ways of selecting the stock and options), risk profile, Greeks, advantages and disadvantages, ways of exiting the trade, and an example.

However, the ways to select an option are not always adequately covered. For example, in the "short (naked) put" strategy, the author simply writes "Give yourself as little time to be wrong". The concept of Annualized Premium is not covered, there is no method given to select the best option from different strike prices and expiration dates. If you are interested in this technique, you can find it in "Options as a Strategic Investment" by Lawrence McMillan, chapter 19, or there is a special book "Using Options to Buy Stocks" by Dennis Eisen.

You may keep this book as a quick reference, but if you didn't read anything about options yet, I have some recommendations. If you are not quite familiar with the stock market, I would suggest "The Options Course" by George Fontanills and Richard Cawood. If you did buy stocks already, then skim through Trading Options For Dummies by George A. Fontanills; or Options Made Easy by the same author as of the reviewed book.
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on August 25, 2005
Options trader Guy Cohen has captured the beauty of options as a flexible trading vehicle with this book.

He reduces more than 60 options strategies strategy into five key areas:

1. Income strategies

2. Volatility strategies

3. Sideways market strategies

4. Leveraged strategies

5. Synthetic strategies.

Even the newest trader will find his insightful explanations of the most complex strategies clear and concise. This would be the book to have by your side if you were looking for a definitive guide to contemporary options trading if it were not so poorly edited. The mistakes distract from what would be a masterpiece on options trading.
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on June 7, 2006
What I really liked about this book is that it's almost interactive. You can literally dip in to any strategy and find out what it's all about in seconds. There are 7 different tables of contents so you can find any strategy by chapter, by your level of experience, by market direction, by volatility, by risk/reward payoff, and by type (income or capital gain). This makes the book incredibly easy to navigate whether you're a beginner or reasonably experienced, particularly as around 60 strategies are covered.

Every strategy is constructed in modular format which means once you've done one you'll be able to navigate any of the others with easy familiarity.

The graphics are phenomenal - I've never seen the Greeks explained so elegantly and succinctly - and I find myself using this as a reference book over and over again.

This definitely is a reference book - though some may like to read it cover-to-cover, for me the main value has been in dipping in in out.
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on October 31, 2007
I have bought 2 of Cohen's book. The Options made Easy and this. There are so many type of strategies but we only use a handful of them in our daily trading. My favors strategies are Long Call Spread, Long Put Spread, Covered Call, Protective Put and Long Condor as well as Buttery.

I read lots of article which is freely available in the Internet. All of them showed you how to enter a trade. But none of them is as complete as these 2 books. So much so about when to enter, how to create the strategies, the B/E point, the Greeks symbols and etc. But none of them show you enough how to exit a trade step by step in different scenarios! Yeah, including these 2 books as well.

For example in the Sideways Strategies. All I see are these "With This Strategy, you can simply unravel the spread by buying back the options you sold and selling the options you bought in the first place" or "Advanced traders may leg up and down or only partially unravel the spread as the underlying asset fluctuates up and down. In this way, the trader will be taking smaller incremental progits before the expiration of the trade"

I would prefer example a Long Call Condor with multiple scenarios :
ABCD is trading at $52.87 on May 17, 2004
Buy the June 2004 45 Strike call for $8.52
Sell the June 2004 50 Strike call at $4.82
Sell the June 2004 55 Strike call at 2.34
Buy the June 2004 60 Strike call for $0.98

Scenario A) If the underlying is trading at $53.80 at expiration I am getting my profit as planned. Should I wait till the position expire on the expiration date? Or should I close the 45/50 before expiration and let the 55/60 expire worthless? Or unravel the position just before the expiration? Show me the best option to get my max profit!

Scenario B) If the underlying is trading at $49.30 with 7 days to expire. Should I close the entire spread. Or should I close 1 and let the other expire worthless to mitigate my losses and hope it will move into profit for my remaining spread/leg.

Scenario C) If the underlying is trading at $56.20 with 7 days to expire. Should I close the entire spread. Or should I close 1 and let the other expire worthless to mitigate my losses and hope the price for the underlying will fall/up will mitigate loss with my remaining spread/leg.

It's obviously lot of scenarios and how the individual trader deal with the trades. But with different scenario provided with example, we can learn and create our own style of trading.

Everyone know how, when to jump in, but forget how, when, to exit to harness or mitigate your profit or losses. Well this book just not enough for you if you are intermediate and hope to be expert especially on the advance strategies.

The layout of these 2 books is much better and easy for the eyes compare to "Option Volatility & Pricing" from Sheldon Natenberg.
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on February 2, 2007
This book is an outstanding resource for both bginners and novices. There are so may examples and strategies that it is clearly a true resource that will be used over and over again. This book has the unique ability of TEACHNG the beginners the risks, rewards, and "How To's" which I wish all the books I have purchased had provided. My copy is now two years old and looks like an old rag because of the references I use it for. If anyone is thinking of trading oprions, this book should be required reading.

Don't spend your time looking for a better tool. This one will have 90% of the answers you will need to understand option strategies, terms, and risk reward charting.
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on September 20, 2011
I purchased the Author's original text ' Options Made Easy' which I will rate as a good book for beginners. Having read several other texts in between, I purchased this book off the back of the good reviews posted here. Now firstly if someone 'dubs' their work to be the 'Bible' of a subject matter, they are really claiming to write a master piece...the Title certainly means to capture an audience.

The reality is that the book is simply not that helpful. It gives a potpourri of option spreads, how they are constructed, expirations P&L pros & cons etc. I can honestly not say the world is a better place with this book on the shelf than had it never been written. I have read through it once, and never referred to it again.

It simply does not help in understanding option spreads better, nor with adjustments, nor with actually using any of the strategies dynamically pre-expiration.

The Author also sells a hugely expensive course called Flag Trader with ongoing subscription to his website which contains outputs of his custom OVI indicator. He also has another hugely expensive course called the Illuminati Trader. I have enquired following the read of this book and being left unsatisfied (supposing the Author has reserved the nuts and bolts of how to use strategies here). Following my enquiries, I have been bombarded with all sorts of affiliate online marketers and also junk mail through the letter box; written in the 'get rich quick' type format (I will not name the publisher of the junk mail here). Admittedly with money back guarantees....but certainly mainstream marketing, none the less.

Now I need to say this. The Author is an accomplished and clearly educated person; he has completed an MBA at CASS Business School in London and is a member of the Royal Institute of Chartered Surveyors. He is clearly a very powerful marketer, and this particular title strikes me more of a self marketing tool than a reference that will be of any real use to an aspiring student or trader. It will be of no value at all for an experienced trader. Note I said self marketing opposed to marketing his products. The book neither provides a 'how do you use it' (it provides a 'how to construct it ish'). But it is simply not enough to apply.

There simply are many more beneficial texts out there.
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on May 29, 2006
This is an ideal reference book for just about every options strategy I could ever think of. Compared with other options texts I have read, this definitely comes under the heading of "Reference Books". I can imagine that this must have been a very ambitious project as every effort has been made to make the book user-friendly and as interactive as a book could possibly be. By this I specifically mean the layout, the liberal use of diagrams (especially good for explaining the Greeks) and even the use of the simple (and sometimes humorous) icons (the stages of evolution are used for each strategy's level of appropriateness for your level of trading experience - the monkey icon for beginners I found amusing!).

At the end there is a chapter on taxation for options traders, which gives a useful introduction to that particular minefield - at least I understand now why my accountant charges me so much for my annual trading audit!

All in all a great book that gets to the point and gave me exactly what I wanted, and therefore highly recommended.
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on June 17, 2014
I have bought several of Guy Cohen's options books. I decided to review this one although this review would apply to the others as well. I will not buy another. While the content is generally complete, accurate and well-organized, it's nothing you can't get for free all over the internet, so why pay the $30+ for it?

One thing that really bothers me about this book is that there are lines of useless text repeated over and over again throughout the book. For example, with each options strategy there is a section "Mitigating a Loss:", the advice is to "Unravel the trade as described previously." Or "Exiting the position:" the advice is to "...simply unravel the trade by buying back the options you sold...". It's these broad, over-simplified statements that are repeated over and over again and make up the majority of the book.

The examples provided are contrived and unrealistic. Every example involves the fictional "Stock ABCD". Using some real-life stocks and examples would add some context and credibility to the book.
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