Volatility Trading

Gives teorical background with strong practical aplication. The volatility game is more profitable and relaxing than directional. I make money following this book.

Incomprehensible Mathematics. Save your money and time. Stay away from this book.

Advances materials and useful.

I do not know who are reviewing this book, having read it, I conclude the other reviews are written by shams. The book covers volatility like so many other authors have done in abundance. Only difference, the author impresses us with his impractical calculus/mathematical formulas. Or rather wantonly to silence his critics. What is the one essential trading strategy it covers? Selling indices straddles or strangles. Does it explain when and how or what? No.

It does reveal couple of other critical “facts”, traditional buy and hold works and buying call or put options will fail.

Fools will be so impressed by the density of the material and will automatically accept the author’s genius at face value. Pass. Useless techno babble.

Out of my large library of options books, this one is by far the best. As a very long time professional equity trader making the transition to derivatives trading, I was extremely impressed with both the content and way this book was written. It is a book written by a trader, for traders. If there was only one book to get on the subject it would definitely be this one. I recommend it to both newbies and advanced professionals alike.

Given how many books on quantitative finance have been published, it is sort of shocking how few have useful information, and frustrating how few have useful *new* information. Volatility Trading contained several ideas new to this professional options quant, clearly explained and well supported (his treatment of Browne ratio comes to mind). I put it in my “top” quality category along with Tavella and Randall, Gatheral, Jarrow, and Wilmott.

The book is aimed at quants, though I believe it is readable by anyone with an advanced degree in a math-heavy subject. It provides a truly practical guide to most of the quantitative issues that come up when rationally considering trades in options and other volatility-sensitive securities.

Volatility Trading is a practical guide to options trading that is both informative to newcomers to the asset class as well as a valuable reference to the experienced options trader. The mathematics are laid out so that they can be easily followed. The text is readable, clear and offers real world insights into its application and related pitfalls to be mindful of. I highly recommend it to all traders.

Chapter 10 is a standout to me which is expanded from the first edition. It is about trading psychology and this chapter alone is worth the price of the book. Sinclair acknowledges his lack of academic credentials in the field but his experience allows him to present insights that are far more useful than what can be drawn from academic studies. I have read a number of books on the topic and frankly wasted a lot of time in doing so. This is the most practical and concise piece that I have come across on the topic. His plainly stated assertion that confidence comes from competence and competence comes from knowing exactly what your edge is and most everything else is misguided is as accurate as anything I have seen on the topic. Even for the more experienced traders the section on self-attribution bias is a helpful reminder that you are not as good as your results in busy, volatile market and usually not as bad as your results in slow, tight markets, is a helpful reminder when trying to assess your own performance on any time scale. There is a good summary of much of the literature on the most common mistakes made in the evaluation process as well. The points he makes about the importance of finding a partner and what to look for should be strongly considered by every new trader. These relationships have a greater impact on careers than is commonly acknowledged.

This book is worth the time to go through and a valuable guide to have on your bookshelf.

I had not intended to write a review for this book. Not because it’s undeserving of one, to the contrary, but because other reviewers such as Bachelier and Donninger have already provided very thorough reviews which should tell the prospective reader everything they need to know about why to buy this book, or not. However, I see that a recent reviewer has questioned not just the merits of the book’s content, but has also concluded that those positive reviewers must be shams. That’s a shame that should be set right, as a reader who is truly interested in volatility trading would be deprived of a valuable resource if they were to put much stock in that particular opinion.

The only problem with this book is that the author does not pander to the desire of many retail traders to be presented with simple pat answers and strategies on how to trade. You are instead presented with a very thorough discussion of the mechanics and processes that underly volatility trading as practiced by professionals. The math can be a bit daunting for those, like me, who are long out of school and in need of some revision work in calculus, but in truth only a little of it will be beyond the reader who is prepared to make an effort. Equally to the point, confirming the validity of the math isn’t essential to understanding the points being discussed and taking away a lot of valuable knowledge. A reader finding the mathematical going challenging might wish to first try the author’s other book “Option Trading” which covers much of the preparatory ground at a somewhat gentler pace. That worked well for me.

As an aspiring and developing trader of options, in the past few years I have read pretty much anything I could get my hands on from the ridiculously simplistic (for example, “Can I Make a Living Trading Options?”) to the exceedingly academic (such as Gatheral’s “The Volatility Surface”) and everywhere in between. This book is one of the few that hits the sweet-spot. It concedes nothing at either end by not providing simplistic answers to a complex subject, nor offering theoretical digressions that fail to come back to practical trading issues. Instead, what is presented is the foundation work upon which a sound volatility trading process can be built. It’s up to the reader to decide if they want to pick up the tools, but having read the book you will know what those tools are and what you might do with them. Certainly, some of the content will be beyond the ability of many retail traders to implement, but of equal value the book will provide insight into the rigour and depth of knowledge that is being brought to bear by the counter-parties one is trading against. Most of them, like the author, are professional traders and many earn their livings trading this way.

As to the question of the integrity of some of the previous 5 star reviews, the interested reader might do a little google research on the the author and on a couple of the reviewers. For the author, there are a goodly number of published articles on trading (Active Trader), contributions to forums such Wilmott & NP, and presentations at industry events to judge by. For the reviewers, one might wish to follow some of the clues provided in their profiles. They too are very credible in the field, offer much of value to consider, and the reviews are undoubtedly the product of individuals with a serious depth of knowledge on the subject matter.

Ultimately, I would recommend this book only to those who have left the hope of pat answers and strategies behind. If one has got to the point of recognizing that successful trading requires engaging with the details and looking hard at the mechanics and ideas in order to build a trading process, then this book is a helpful step along the way.

Book was very very advanced. I’ve traded volatility before and this book was way over my head. Might be a good book for a mathematician, but it wasn’t for me.

This book is great. It covers almost the whole circuit of volatility trading. Although the author claims this book is the advanced one comparing to his other book(option trading), it is not that hard. All mathematics involved are BS formula and basic calculus, maybe a little bit differential equations as well.

This is not for casual reading by any means and I would say that only a select audience will benefit from this but the material is useful. Ultimately the deeper the understanding of the underlying assumptions, the better you can seek out trading opportunities as many of the assumptions in the real world fall apart because of a number of issues. I felt that the author did a fine job in presenting a rigorous mathematically foundation that for traders or risk managers, can and will be useful.

I give myself three stars for my comprehension of Euan Sinclair’s “Volatility Trading”. As a retired engineer and experienced option trader, I could conceptually follow some of Sinclair’s math, but it’s been difficult to apply his models and strategies to my retail trading. The target audience appears to be quants, market makers and option arbitrage traders. They probably appreciate and comprehend Sinclair’s mathematical comparison of volatility models and strategies far more than a retired engineer who had to constantly refer to his college textbooks. Hopefully Sinclair will publish another edition that’s dumbed down for people like me.

If you are looking for serious material about volatility this one is excellent. It is well written and extensive about the topics .

I’ve given this a 4 star review because the book is well written and provides deep analysis into an important technical area for trading that is quite difficult to find without access to proprietary trading IP. The book does a good job at approaching technical and formulaic breakdown of estimating Volatility and its historical trends.

The reason I’m writing this review, however, is because I’ve now just come across the second written error in the book that mistakenly describes either a complicated formula or displayed data. As this book covers complicated methodololgy that readers will no doubt attempt to use to make money in the market, I feel like such errors have no place in this book. The first I came across mistakenly referenced a figure in one of the Volatility estimation formulas as “Close price” when it in fact was referencing a figure in the formula for “Open price”. I came across that issue the other day and didn’t worry too much about it. I’ve however just now came across two charts on page 46 of the 2nd edition that have duplicate descriptions, despite describing opposite data. The two charts are supposed to show the differing levels of Vol distribution during Bull vs Bull markets and the data is correct. However, both charts are labelled as describing the “Volatility Distribution during Bear markets”.

If you’re well versed in Volatility and its general trends, you will likely catch these errors and can still benefit from the mistaken descriptions (that is why I’ve still given the book a 4 star). However, I do find it somewhat unacceptable that a book of this price has more than one glaring technical error. These formulas and trends may be used by readers to risk their personal money deploying trading strategies outlined in the book; the reader should be highly confident that such obvious errors are not present throughout the literature.

The second edition of Volatility Trading by Euan Sinclair is one of the most comprehensive and insightful books on volatility trading that I have ever read. While the book uses formulas to convey mathematical and theoretical concepts, the insights in the book were clearly gained from years of practical trading experience.

The author wisely begins with an explanation of the Black-Scholes-Merton and even more importantly includes a discussion of the BSM model assumptions and its deficiencies. In his chapter on “Stylized Facts about Returns and Volatility,” Sinclair explains how volatility actually behaves in the real world and offers numerous graphs to illustrate these relationships. “Implied Volatility Dynamics” goes into even more detail on how implied volatility evolves over time.

I particularly enjoyed his chapters on “Generating Returns through Volatility” and the “VIX.” These chapters investigate the variance premium, its sources, and how to exploit it in practice.

There are many pearls of wisdom in the book, but perhaps the most important is Sinclair’s continuous emphasis on the need to identify and systematically exploit a trading edge. When trading options, this typically means exploiting anomalies between implied and forecasted future realized volatility.

Finally, Sinclair goes beyond volatility trading and includes several detailed chapters on risk management, position sizing, and psychological pitfalls.

I have been an investment professional for over 30 years and still found new insights in this book as well as several interesting research and strategy ideas to explore.

To start, Volatility Trading by Euan Sinclair is one of the BEST if not THE BEST book in the market place on the topic of Volatility Trading. I have read the book multiple times. There is so much value to be gained by reading the book that I’ll probably read it multiple times again. Relative to what is out there in the market place, this book is far and beyond and also much more applicable to use and enhance a trading strategy. In total the book is extremely strong but I’ll highlight my favorite areas. Volatility Measurement, Stylized Facts about Returns and Volatility, Volatility Forecasting, & Implied Volatility Dynamics were extremely meaty chapters but in a good way; large value added, read them. Euan actually does something most writers can’t do. Most books in this area on the market place are so theoretical; when I first read Volatility Trading it was a breathe of fresh air to the highest extent. A book that applies the theoretical side but with very real world applications that also have the ability to enhance one’s risk-adjusted returns; in other words, this book adds value massively to your P&L. Highly useful and applicable information to better your game and gain an edge in the market place. The Chapter on Hedging was exceptional, that chapter was fantastic in going through the different hedging methodologies he covers, once again, clear value added chapter. Of course, there are others but this was an excellent chapter and I highly suggest taking it to heart. The Distribution of Hedged Options Positions was a great read. The Money Management chapter absolutely had real value to be gained but the Trade Evaluation chapter could be the most valuable in the entire book and that doesn’t de-value the value gains from the other chapters. There is so much to be gained from this chapter to analyze and evaluate ones performance of their trading strategy. Trade evaluation is an extremely valuable chapter. The Psychology chapter was a great read, more real applications and enhancing material. The Generating Returns through Volatility was absolutely fantastic, great again. In general, without re-writing the book in the review, the book is a MUST READ. If you are a money manager, if you are a trader, if the financial markets are how you make money and you haven’t read this book then in my opinion you are doing a disservice to yourself, your payout, and your clients/shareholders. There is so many ways to enhance ones game in this book to have more of an edge in the market place that the fact Euan wrote this book and gave it to the markets is a gift in itself. Be thankful he wrote this book. In conclusion, I used value added, value gained, fantastic, great, exceptional, performance enhancing and repeated them for a reason, that’s because its true. If you want to improve your game, and of course, potentially improve your P&L then read this book. I hope this review is helpful for people out there.