No comments about Options: Trading Strategies That Work.

5 comments about Financial Analyst's Indispensable Pocket Guide.

1. I'm studying for CFA and bought this book to have quick reference to concepts I already covered.
   I'm very happy with the book. While studying, if I'm unsure about a concept or find the text book definition to vague or too long, I refer to this guide.
   It keeps everything short and sweet. Intuitively sorted by topic areas.
   I definitely recommend it.



2. It is a very practical guide for handy information. It is quite usefull for my daily work needs.



3. I'm not a CFA candidate, but I've been an investor for years and always appreciate learning more about the field. My father was president of the CFA for a couple of years, and after 15 years working on Wall Street I have a reasonably broad understanding of some finance.

   What impressed me most about the book was how short and terse the definitions were. Clearly they are useful and present good insight into what's important and why.

   What impressed me least was the lack of mathematical rigour (perhaps one can't have both brievity and exactness?). For example, many of the formulas only work for specific instances, and details about yield/rate conventions are omitted.

   Overall, it struck me as useful overview and quick reminder to financial analysis and the language/terms used. It's not really indispensable, and is not authoritative. But for a quick refresher, or ballpark estimates it's fine.




4. This is the only book of its kind, so far. The author compiled this pocket guide after completing his CFA program and realising that the vast concepts, terms and designations learnt were soon being forgotten.

   That being the case, candidates of, as well as those who have completed, the CFA program would find this book a useful one-stop guide to all those concepts, terms and designations learnt in the pursuit of the CFA designation.

   The book is arranged broadly around the various topics of the CFA program i.e. Quantitative Methods, Economics, Financial Statements Analysis, Equities, Fixed Income, Derivatives, Real Estate, Portfolio Management, Ethics, Behavioural Finance. As such, the CFA candidate would find this book more useful than say, a general finance/business masters student.

   But I reckon that this book, though published as recent as this year, is already in need of an update. The CFA syllabus is constantly evolving. As a result, a number of concepts in say, Level 1 of the CFA Program, are not found in this book. Also, a number of the textbooks used in the CFA program which the author had based his book on, have either been superseded by newer editions or replaced all together.

   All in all, I found this to be a useful book and a unique concept. Until a better book comes along, I will be using this book religiously to prepare for the CFA exams as well as to refresh my memory.




5. As a CFA candidate, I find this to be a useful summary of the key concepts that we are taught during the course of the programme. However, regard it as more of a "Cliff's Notes" of the programme -- with all its inevitable shortcomings -- but a handy little reference piece nonetheless. After completion of the programme and years down the road, I am sure that I will find it quite useful in helping to jog my memory and the sleepless nights that the CFA programme gave me! -- I hope, however, that a revised version will be introduced and perhaps with a less odd title. It is not a book for everyone, but anyone who wishes that s/he had made notes whilst studying for the CFA programme will find this book useful.

5 comments about Trading Index Options.

1. Like others I have noted that the software doesn't work anymore that comes with the book. Also, I can't understand why they sell a kindle version, when the software obviously would not be provided. I could not find the author's e-mail address so I could not request an alternate software program.



2. The book is very good from a professional options trader and teacher.
   
   A lot of the comments from people who recently bought this old (but good) book for the software, were not diligent enough to think about contacting the author. I contacted the author and he mailed me an updated version of the software that comes with the book. He was very kind and cordial.



3. The good news is that this book is very nicely done, providing a useful foundation to beginner and intermediate options traders. I found that I learned quite a lot about the interactions between option pricing and the various factors influencing pricing. The author provides numerous case study examples utilizing the OP-EVAL(TM) software included with the book. A majority of the book contains detailed examples describing how to use the software and interpret the output. The bad news is that the software will not run on current Windows operating systems (Windows 98 or newer). So don't buy the book if you want to try the software on your own. Efforts to contact the author, through the publisher McGraw-Hill, about the possibility of updating the software, have been unsuccessful. Otherwise a good book.



4. From the beginning pages, the explanations are flowing and account for all levels of competency in options. When you finish the very readable book, you will have a solid understanding of index options. The graphs are excellent while the mathematical concepts are carefully explained. I have traded stock options successfully for the past ten years and I now have enough confidence in my knowledge of index options to not panic when hitting the enter button.



5. I was eager to use the software that came with this book, but since my PC runs on Windows 98, it will not install. They should update the software so it will run on later versions of Windows before they sell the book again, or least ask you what version of Windows you are using before you place the order.

5 comments about Option Pricing: Black-Scholes Made Easy (Wiley Trading).

1. While the subject matter of this book is challenging, I was not pleased when the book arrived and the pages were meant to be read at 90 degree angle from normal books. That, added with a tight binding made the book nearly impossible to move through. I was also not impressed with the quality of the printing inside. It was far too faded. I felt that the book did not do justice to the subject covered and I ended up returning the book and purchased another book on the subject. I am not trying to be overly critical of the book. I was very enticed by the title and cover, but the way the inside of the book was set up was not near to the quality dedicated to the cover. I think that this has the potential to be a better book if the inside is rotated to that of a normal book and the quality of printing was improved (color printing would be ideal).



2. I liked that this book was interactive in the sense that you use included software in each of the exercises and thought that the exercises did a good job of explaining the underlying concepts needed to understand option pricing theory (volatility, probability distributions, Black Scholes assumptions, etc). I did think the software itself was poorly written -- but this was partly offset by the fact that the book gives you step-by-step instructions on what to do in each exercise with the software, and if you follow the instructions it works pretty well.
   
   That said, I recommend Hull's Options, Futures, and Other Derivatives as this is one of the leading references on the topic. This is the book that everyone in the industry tends to talk about....
   
   Note that I did not take the following into account when I was rating this book but I purchased the text directly from Amazon.com (not a 3rd party Amazon.com merchant) and when it arrived it was not what I was expecting. The pages were monochrome (photo-copies in black-and-white) and some of the pages were out of order. There was no CDROM included but rather a link to download a .zip off of the publisher's website.



3. This book makes it relatively easy to understand the mathematical principles behind the Black-Scholes theory. The CD guides you through various scenarios and plots everything for you. You don't have to be a mathematician with a PhD from the University of Chicago to appreciate the explanations and diagrams depicted. A "must-have" for every options trader or investor - a definite "keeper"!



4. Fantastic software!

   The book is really a step by step tutorial on how to use the
   probability forecasting software that is on the CD.

   Excellent learning tool as well as a decision-analysis tool for investments.

   Really great. Loved it. Learned a lot!

   Many thanks to the author.

   One Caution: It doesn't work on a Macintosh
   (unless you have PC emulation software for your Mac).

   Cheers,
   ---Freddy




5. I was skeptical to buy it since there were more than 100 different books available on options... but I am glad I choose this book. Its easy and the software developed beats anything I have seen yet... All the free softwares available are excel based but do not offer such insight on the subject as this book.
   I would strongly recommend it to anyone. Only hitch is that the software is bit slow to run but it performs...

2 comments about Strategic Investment: Real Options and Games.

1. In Strategic Investment: Real Options and Games, Smit and Trigerogis developed a complete guide on how to develop valuation studies based on Real Option Theory and Game Theory. The approach is affordable for graduate and post graduate students or even for analyst locking for orientation about valuation and investment



2. I develop practical Game Theory Simulation Models for strategy formulations, experiments, and selection. This book provided me with a practical guide how to use Game Theory and Real Options for strategic analysis.
   The use of Real Option with Game Theory was new for me.
   Well written this book it is a must for executives.
   [...]

5 comments about The Four Biggest Mistakes in Option Trading, 2nd Edition (Trade Secrets).

1. This is a short easy-to-read book that contains an awful lot of valuable material for its thin size. It explains why the vast majority of options traders lose money over the long-term (despite occasional big wins), and it explains what you need to know in order to even your odds. I highly recommend this book of you are thinking about getting into options trading, or if you are a beginning options trader who wants to do better.
   
   There is big money to be made in options, but only if you are know what you are doing. This book can help you by showing you how to figure out which options have a greater probability of being profitable.



2. This small, quick read drastically changed the way I view options trading. Most of my knowledge about options has been obtained from an academic background - courses about hedging and quantitative arbitrage. I always knew that options could be a powerful tool for directional speculation, but my attempts to master it were always defeated by culprits such as time decay.
   
   It was refreshing to see that this author recognizes that the academic view of options is flawed thanks to commissions and liquidity. He writes from the perspective of a speculator. After reading this short guide, I learned that as a speculator I was committing these Four Big Mistakes of option trading.
   
   The Four Biggest Mistakes recognizes that the real market behaves much differently than the theories presented in academic class. It covers four distortions in the real market not typically taught by academia:
   
   1. Option volatility fluctuates, causing the option price to act totally out of relation with the underlying stock price
   2. Lower Deltas also mean that the option is less likely to be in-the-money at expiration
   3. Complex quant strategies are not fullproof; each complex strategy has a downfall
   4. Quant arbitrage strategies typically do not work because of a finite bid/ask price (less-than-perfect liquidity)
   
   These real-market distortions cause people to misunderstand how options work in reality and consistently suffer losses. To understand these mistakes, the book is concisely written in a format presenting 1) the mistake 2) why it causes losses, and 3) how to avoid the mistake.
   
   This is the most practical guide to options trading I have ever read. It is explained in clear language, short, and will help you become a better speculator. I recommend it if you want a realistic view of the options market.



3. I had heard about this book, but did not read it until recently. A "MUST" for all new traders. It covers mistakes made by all - stocks, options, index, futures, currency, etc. Well worth the "investment."



4. This book is a joke. It should've been a pamphlet, because the pages could've been reduced to 30 pages-tops. The 4 mistakes can be found in any basic principles of investing in stocks, futures, funds, etc.



5. Experienced traders should already know what's in this book, but those new to options trading would probably benefit from reading this book early in their careers. The first chapter, on implied volatility, is very good and Kaeppel, unlike a lot of other authors, gives you an objective method for making judgments about relative implied volatilities, which can help you shape your trading decision. Prose is easily digestible and Kaeppel slams home his points. A quick read.

1 comments about Real Options and Investment under Uncertainty: Classical Readings and Recent Contributions.

1. This textbook provides the student with a good collection of papers on fundamental aspects of real options. Traditional NPV analysis gets a trashing by this book and the proponents of real options analysis. Of course, there is some merit to it or else many prominent academics would not waste their time discussing the issues. There is a good blend of theoretical and empirical papers, and the papers discuss a variety of applications from the traditional natural resource investment to real estate.

5 comments about Tips and Traps When Buying a Home (Tips & Traps).

1. This is an overall good resource. It is an almost 20 yr old book (published in 1990!), hence it can't be relied upon today (2009) as the only authoritative source of info before buying a home. But, in general, it has important information on numerous tips and traps of buying a home, to better equip any 1st time buyer (like me).



2. I was pleasantly surprised with how easy this book was to read and understand. I would be interested in reading more of his titles based on my experience.



3. Mr. Irwin states in this book that a real estate agent taking a commission on his own purchase can get sued on the grounds that he is effectively acting as an agent for the seller, and this creates a conflict of interest. This is based on the antiquated notion that a buyer's agent is construed to be a subagent of a seller's agent. Today, a buyer's agent is construed to act independently of a seller's agent, and is thus free to take a commission on his own purchase. The matter is simply one of an agreement between agents to share the commission.



4. This book is very easy to read, well organized, and contains a LOT of essential information for anyone looking to purchase a home. I recommend it without any reservations.
   
   One issue: I'm not sure if there's a newer edition of this book than I received last year, but it's a bit out of date. For better or worse, a lot of mortgages floating around out there today - especially for first time homeowners - are not your standard 30 year fixed. The financing section of the book needs an update detailing the pros and cons of the newer and more complicated types of financing that are more common today. It does this to an extent, but it's insufficient. Also, the figures used in the book are completely unrealistic. Mortgage rates are very different and so are housing prices. Not a problem if you can handle the math on your own, but certain tables are completely obsolete at this point in time.
   
   Just one point on a personal note: This book really tells you about all the BAD things going on in real estate today. This isn't a fault - it's good to know about the million different potential pitfalls when buying a home - but it never tells you to put things into perspective. In other words, you can come away from reading this feeling very pessimistic and cynical about the entire process, which doesn't have to be the case. If you arm yourself with knowledge, a good attitude, and surround yourself with good people - namely the best real estate attorney and home inspector you can find - you'll find the experience isn't as bad as the book can make it seem.
   
   Best of luck!



5. Not every page is enlightening, but overall builds confidence in the daunting process.

5 comments about Option Writing Strategies for Extraordinary Returns.

1. Basic options book with little new. Author doesn't give any proof of his successes and some of his examples have actually gone bankrupt. Its a book for beginners.



2. I have 15 years of experience with options trading. For the past 2 years I have invested in accordance with the strategies described in this book - and have benefited as much as the author did in his verified account statement published in the book.
   
   This book is not about options strategies. It is about investment strategies - very successful ones. It uses covered option writing of both puts and calls to generate a third source of income from common stock holdings. The strategies provide me with the opportunity to partially hedge my stock portfolio as a way of offsetting the extreme volatility that characterizes recent stock market trading. The third source of income - premium income from writing options - is a significant addition to the first two sources of income from common stock, dividend income and capital appreciation, both of which currently have special tax advantages.
   
   As an example,
   - On August 16, 2007, I bought 1,000 shares of TE at 15.01.
   - On the same day, I "sold to open" 10 TE Jan 2009 17.5 calls at 1.00.
   - On September 4, 2007, I "sold to open" 10 TE Jan 2009 15 puts at 1.25.
   
   The annual dividend from this NYSE-traded utility stock is 78 cents, or 19.5 cents per quarter. To calculate the return (not counting any price change) from the 3-legged position over the 17 months until option expiration, first add together five dividends of 19.5 cents, or 98 cents per share. Then add 1.00 from writing a call, and 1.25 from writing a put; that's a 3.23 return on a 15.01 investment - giving me 21.5% on my total investment over the 17-month period - which works out to be an annual rate of return of 15.1%.
   
   Of course, the options may be bought back, written up, or exercised before Jan. 2009, and the stock price may go up or down. In any case, the investment strategies described in this book serve me very well.
   
   The author of this book has put in place three "guidelines" that reduce risks associated with writing covered LEAPS.
   
   Guideline 1: On the upside, the investor is encouraged to write only that number of calls covered by the underlying shares of common stock (for example, 1,000 shares of stock allow the writing of ten covered call contracts).
   
   On the stock market downside, guidelines 2 and 3 are employed
   
   Guideline 2: Puts written should be 100% cash-collateralized so that funds are present to purchase any shares actually assigned.
   
   Guideline 3: A mental loss limit of 2% of a portfolio's value is recommended. A "portfolio" should have at least ten different holdings at any time. The portfolio's value is the sum of the values of the three legs for each of the ten or more investment positions. For example, if a portfolio value is $50,000, then any position (consisting of long stock, short puts, and short calls) that is down more than $1,000 should be closed and replaced with another position When any of my net positions are down more than the loss limit, I close the position and move sideways into a comparable stock. In this way, as stated in the book, I benefit from realizing a loss for tax purposes while maintaining the same (approximate) relative financial position.
   
   These investment strategies have helped me traverse the wide swings in the stock market while still earning an attractive yield.



3. I am an investor with 10 years of experience with writing options. I am very pleased with the conservative approach presented in this book.
   
   Of course there are other capital appreciation strategies and other income-generating strategies, but this book's strategy of the three-legged position (buy the stock, write the cash-collateralized put, and write the covered call) provides an excellent balance between risk and reward.
   
   The author stresses the importance of fully collateralizing the put, with either cash or near-cash investments such as tax-qualified preferred stock. Naked puts are never recommended. Writing covered calls and cash-collateralized puts are the key to safer long-term investing.
   
   The relevant comparison for me is how the three-legged strategy with fully collateralized puts and 100% covered calls (all LEAPS) compares with the standard investment strategy of either buying to hold a stock, or attempting to "time the market" by buying, selling, or selling short a given stock. I am convinced, through my experience with the three-legged strategy, that it is the best approach.
   
   The fact that an extremely large number of options expire worthless (about 85% of them) provides fertile field for the investment strategy of writing options for a third source of income. I can reap the rewards from the option expiration when it occurs, or, prior to expiration, I can re-write the option at a different strike price or different expiration date, or simply buy it back.
   
   I strongly recommend this book for long-term investors seeking additional investment tools with an acceptable risk level.



4. I am an option trader with 3 years of trading experience, and I am thoroughly alarmed after reading this book.
   
   Here are my criticisms:
   
   1. Lack of Clarity
   Two problems here: name, and explanation of the strategy. Mr Funk insists to call his recommended strategy "the three-legged position". OK, everyone is entitled to create their own pet names, but it would have been useful to tell the reader what the rest of the market calls this strategy - it is "Covered Strangle Writing" or "Covered Short Strangle".
   
   More serious than Mr Funk's refusal to come clean about the name of his recommended strategy, is his failure to explain the WHYs of this strategy. Now the common use of Covered Short Strangle is to generate income, and this is discussed at some length in the book. However, there is no discussion about the relative merits of this strategy compared to other income-generating option strategies, such as Covered Call.
   
   More dishearteningly, Mr Funk creates a twist in the standard Covered Short Strangle to devise a capital-appreciation strategy. Would a traditionally income-generating strategy be effective as a capital-appreciation strategy ? How does it compare to other capital-appreciation option strategies ? No discussion. Why does he recommend the sale of deep-in-the-money put options ? No explanation.
   
   In short, we get good clear details of the mechanics of his recommended strategy, but zero explanation as to WHY he recommends each part of this strategy.
   
   2. Fuzzy discussion of RISKS
   No where in this book can we find a risk chart that shows clearly at what price ranges will this strategy make or lose money, and by how much. You need to read the book very carefully to deduce (yes, deduce - because Mr Funk does not spell it out clearly) that it will make money when the stock price moves strongly upwards.
   
   Furthermore, Mr Funk only glancingly discuss risk management. What to do if the stock price moves down instead .. ? Well, don't forget to set your stop-loss at 20%. That is it. There isn't even any explanation whether the stop loss should be applied to all three positions (the stock, the short put and the short call options), or just the stock.
   
   So, the blurb in the front cover "Benefit from both up and down markets" is misleading. This strategy will hurt on the way down, and for the capital-appreciation variation (with deep in the money short put) it will hurt when the stock price is moving sideway too!!
   
   3. Zero discussion on the strategy's disadvantages
   Reading through this book, you will think that this strategy has no weakness at all. Let's refer to what other leading option experts have to say about it:
   
   "Very high risk and capped reward. Not recommended." (Guy Cohen, "The Bible of Options Strategies", 2005, p. 305) He goes on to say that while this strategy generates better yield compared to Covered Call, it is also substantially riskier, "the position can become loss-making at approximately double the speed as a simple Covered Call position" (p. 52).
   
   "So a covered strangle - which is a covered write and a naked put - is equivalent to selling two naked puts. Therefore, it would be more efficient to just sell two naked puts rather than bother with the covered strangle write." (Lawrence G. McMillan, "McMillan on Options", 2004, pp 76-77) He goes on to say that simply selling two naked puts will bring lower collateral requirements, lower commision costs and avoid having to deal with three bid-asked spreads.
   
   Every option strategy has a weakness; so this book's silence on this very important subject makes it a serious DANGER to your financial health.



5. I got interested in this book after seeing it listed as one of the "YEAR'S TOP INVESTMENT BOOKS" in the STOCK TRADER'S ALMANAC 2006. The description said that "conservative investors who are delighted to make 10% to 15% annually, year after year, should buy this book." I am a conservative investor with an objective in that range.
   
   Not only does the book give me step-by-step directions for achieving my goal, by writing puts and calls for the stocks I purchase, but also it provides the actual, verified results obtained by the book's author. That convinced me. I am now taking advantage of the three sources of income - capital gains, dividends, and option premium income - while feeling comfortable that I will benefit from my investments no matter what the stock market does. That's a good feeling for a conservative investor.

No comments about Advanced Options Trading: Approaches, Tools, and Techniques for Professionals Traders.