How to Price and Trade Options: Identify, Analyze, and Execute the Best Trade Probabilities
$20.49
| Author(s) | |
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| Format |
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| Pages |
220 |
| Published Date |
2015 |
Rather than teaching options from a financial perspective, How to Price and Trade Options: Identify, Analyze, and Execute the Best Trade Probabilities goes back to the Nobel Prize-winning Black-Scholes model. Written by well-known options expert Al Sherbin, it looks at the basis for probability theory in option trading and explains how to put the odds in your favor when trading options.
Introduction:
Options are one of the most powerful money making asset classes ever devised. Yet they were not devised as a money making tool. Rather, their “purpose for being” is to limit portfolio risk. Whether you are talking about a portfolio of one stock, a hundred stocks, stocks mixed with commodities, or a myriad of other combinations, options can be used to either enhance your portfolio’s return on capital, take advantage of leverage to enhance yield, or limit your risk by exchanging a bit of profit potential for the “insurance” a long option provides.
But if you are looking to buy an option to limit your risk, someone has to be on the other side of the trade. In years past, the other side of the trade was usually taken by professional options traders. The professional options trader was a mythical creature who made thousands of dollars every day by “picking the pocket” of the poor individual investor. I want to emphasize the word mythicalll.
Th e professional options trader was merely someone who understood that options trading is nothing more than an exercise in simple probability theory. And this probability theory is easy enough to learn; with a bit of time and effort, most people can master it and use it for their own benefit. Furthermore, today options markets are, for the most part, so efficient that you can trade either side of a narrowly quoted market. Thus, there is no one out there picking anyone’s pockets. Options provide the fairest, most level playing field one can hope for.
When most investors hear the words options tradinggg, they think “too much risk,” they think “calculus . . . too complex,” they think “too time consuming,” and they think “the professionals will clean my clock.” However, none of these thoughts are accurate. I am not purporting that options trading is easy and that anyone can do it. In fact, I am purporting only half of that statement! If you are a motivated learner, trading options is not that difficult to learn.
Contents:
- Why Trade Options?
- What to Look for in a Broker
- Building the Foundation
- Trade Probabilities: What to Look For
- Choosing Your Trades
- Choosing a Strategy
- Exiting Trades
- Executing Your Trades
- Portfolio Management
How to Price and Trade Options: Identify, Analyze, and Execute the Best Trade Probabilities By Al Sherbin pdf
10 reviews for How to Price and Trade Options: Identify, Analyze, and Execute the Best Trade Probabilities
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Riley Kelley (verified owner) –
I have read many books on options since I started trading them two years ago. This is the first book I feel can actually help you start making money. Sherbin does a great job of explaining options from his own perspective, as well as providing a logical and somewhat predictable method to managing your trades. His writings on portfolio management are also very valuable.
Rosalie Dudley (verified owner) –
I can’t add much to what the previous reviewers have offered… assuming they have given the book a “thumbs up”. I have traded options for several years and believe Al’s book to be the best organized, most succinct and practical of any book in my trading library. He has a pleasing way of often qualifying his advice as to what he judges to be fact versus his opinion… both categories based on his extensive experience in the industry.
For anyone interested in options, I suggest traveling the internet to learn the basic concepts, adding the book “Option Volatility & Pricing” by Sheldon Natenberg for more in-depth understanding of the fundamentals and topping off the library with “How To Price and Trade Options” for an excellent reference on how to actually trade and profit from the options markets.
Jameson Gentry (verified owner) –
Too many straneous material.
Jensen Greene (verified owner) –
The 1st 83 pages is content you can find in ANY other options trading book.
Choosing strategies starts on page 83. Then each strategy gets 2-4 pages – this again is breezy, superficial material.
Take the section on selling naked puts – ZERO content on how to pick a trade NOTHING. Just an explanation of why naked puts isn’t as risky as
people think. The other strategy sections are just as bad (superficial)
My only guess is that the other reviewers are either paid shills or haven’t read any other option trading books.
Colter Wade (verified owner) –
I’ve been learning and trading options for close to five years, beginning with two years of extensive option, future and self directed investment education from the leading company in the industry, and two years filling my trading day with a popular internet trading network. Profitable yes, organized and systematic in my trading, no. I had been waiting for the in-depth and thought provoking guidance that is presented so clearly written in this fantastic book. I am going to follow through with the processes laid out in this book for a much firmer understanding of what I am attempting to accomplish with my trading day in and day out. So much more than “trade small and trade often”. How about “trade smart and trade profitable”. Excited to build my profitable trading routine with the accompanying website too.
Amelie Love (verified owner) –
It’s humorous to me how those of us who buy Al’s Sherbin’s book get to critique what he has written and he has deemed important in order to trade options successfully. (especially when considering his decades of experience and impeccable career…read the bottom lines on the back of the book!) This guy has been steadily successful for decades-who cares what I think?
So for those who may hesitate before buying this book I offer the following: This book contains information that other options trading books have never covered. The chapter on “Portfolio Management” is worth it’s weight in gold! Al Sherbin presents concepts and trades that are probably a bit more advanced than a new trader would realize even exists- but those trades are fully explained in detail and completely understandable. The concepts, the trades, the emphasis on exactly how to Identify, Analyze and then Execute options trades make this book a must have. As another reviewer has said: “….an Instant Classic”…
Duke Wells (verified owner) –
Great reading, Easy to follow. True and genuine. If you are looking for extensive information about greeks, look somewhere else. The book is taking you from choosing your tickers to the more advanced concepts of the Kelly criterion and probabilities. Happy with my purchase. Thanks Al.
Cecilia Ward (verified owner) –
I have benefited by hearing Al speak to small groups twice before the book publication. To use his approach, you need a trading platform that allows the adding of custom studies to your charts. I’m pretty certain I use the same trading platform as Al based on his in-person small group meeting presentations (thinkorswim by T.D. Ameritrade). These custom scripts can be gotten on various message boards for free so don’t let this issue stop you from reading this book.
Al’s approach is heavily probability based so he spends a lot of time in his book explaining this and then he demonstrates how to apply this probability approach to selecting good trades. Almost all of my trades have been “defined risk” except for a couple short puts. I’m mentioning this to let you know this book is definitely for beginners as well as those more experienced. I look forward to employing some “earnings trade” concepts but I have purposely started slow to make sure I understand the content in this book.
I’m confident this book will become a Classic. It is so well written and directed at those really wanting to learn and profit from trading options.
Evie Acosta (verified owner) –
An interesting and thought provoking take on options trading. Al Sherbin’s writing is clear and easy to read but definitely adds information far beyond what is available online.
Selena Atkinson (verified owner) –
First of all let me say that I think the book is very good on overall concepts, and secondly that I have not finished the entire book yet so I will update my review in a day or two when I finish it. I greatly enjoyed Al’s discussion of technical analysis and his detailed explanation of looking for trades. I do need to point out a couple of what I consider rather serious shortcomings that I have found so far. Firstly he gives the butterfly strategy rather short shrift in only looking at a 1 strike wide butterfly. If a larger width is used then one has the opportunity to “harvest” the embedded “baby butterflies” or “unseen verticals” as well as moving the verticals around to “harvest” them or reduce risk. Unless he does it later he does not mention asymmetrical configurations either. Secondly in his discussion of short put versus long stock, he makes a very serious lapse in my opinion when he outlines the P/L at expiration of the two strategies. Although he is most certainly completely aware of this, he should have mentioned the P/L of a quick drop in the underlying and an increase in implied volatility that would probably easily triple the value of that $1.00 put he was discussing. True if you are prepared to take the stock (which you should be) then this might not be that important, but it is not a good feeling seeing a large drop in your P/L and if you are not sized correctly could be rather devastating. This is why personally I prefer some kind of exposure to long options as well as short puts for example. As this will generally give me at least “one more option” (pun intended) as to making some kind of a strategic move if I need to as my outlook on volatility or the underlying may change over time as I am frequently wrong on my initial assumptions (more than I would like for sure). I’ll update this review if needed when I finish the book but overall I highly recommend Mr Sherbin’s book and thank him for his contribution to the options literature. I am really enjoying the read. Having finished the book now I also have to upgrade my rating to five stars