Options Trading: The Hidden Reality – Ri$k Doctor Guide to Position Adjustment and Hedging

I can say this is one of the few outstanding texts for the practicing option trader.

You will really need to have a intermediate understanding of options to benefit.

Cottle covers trading options in a unique way that will really take you to the next level.

His coverage of adjusting positions is outstanding that I have not seen covered anywhere else.

The book will require a lot of work to really understand but after a few readings you will start to feel the lights coming on.

this is one of 4 or 5 option books I would really recommend if you master this book you will be well on your way to understanding options on a very deep level.

Cottle knows options! If you want to trade options and be profitable this is a must read. Cottle teaches things that the others do not go anywhere near. There are many books that can give you the basics, but this book goes far beyond that. This book teaches how to really analyze a position. There can be many many ways to get into a position and many many ways out, this is where this book truly excels.
If you are looking for a book that is easy to read this is not for you. But, if you are looking to really understand the possibilities of options and how to use them, this book is for you. I have never seen any other book go into position dissection like this one!

This is a completely different beast. I would qualify the Cottles book as an expert practical overview. “Overview” nonetheless as it goes over the main spread families chapter after chapter. Whether or not Cottles loses you along the way, you will benefit from the powerful visuals modeling spread behavior as a function of the greeks and implied volatility. Cottles goes next to your Natenberg on your bookshelf.

I have been studying options for several years. I can really only recommend a few books. 1) Option Volatility and Pricing by Natenburg 2) McMillan’s Books and 3) This book by Cottle. If these books are “above” you, then frankly, save your money. This world is filled with people who want to get rich quick. They will sell you the secret gimmick to make money. If there was such a gimmick, no one would sell it! It would be top secret, they would make their money and buy an island to retire on. You can learn to trade options, but it requires time, study and a lot of work. You either need a mentor or you need to work with a professional to get help. Books 1 and 2 that I listed help fill in the gaps. Charles has other educational tools that help fill in the gaps. This book is excellent. It covers the essentials and will help you become a better trader. A lot of the information is not duplicated elsewhere. It is worth the money!

When you start reading about option trading, the first few books you run into seem to be so enlightening that you generously give them a 4-5 star evaluation on Sacredtraders.
Then, as soon as it becomes visible to you that the “get rich quick” paradigm does not apply to options, you learn to better select your favourite authors.
Finally, you shore to Charles Cottle’s book(s) and, despite you 13+ year studies in options, you start to question yourself whether the study efforts you spent until then were worth their while.
This book is neither an easy read, nor a quick recipe to master options. It is a book that deserves study, hard study, no shortcuts, as Charles himself wrote in his dedication on my own book when I visited him in his office in Chicago.
The author starts giving the reader a very fresh (unique, as far as my experience goes) perspective about option positions analysis through the so called “dissection” aimed to alter the trader’s perception of his position and to better understand and measure risks.
After this, the book goes through analyzing in a tad more traditional way nuts and bolts of options: greeks, IV and various nuances like dividends, exercise, etc.
From Ch 4 on, the book goes deep into analyzing the 4 pillars of option trading: Verticals, Straddle and Strangles, Wingspreads (butterflies, condors, etc.) and Time Spreads. I found those chapters to be insightful and refreshing, giving the reader a lot of new perspectives on topics (e.g. the butterfly spreads) oftentimes neglected by other authors.
In the final chapters, the book discusses the volatility skew (challenging) and some insight from market makers (very challenging, at least for me)and closes with a gem on hybrid hedging techniques created by the author.
In closing, I think that if there is one book you must not read but master if you want to deal with option trading, this is the one.
Mr. Cottles’ unique way of teaching never tries to let you think options are easy; he’d better try to discourage you from going ahead than letting you think to that 100K BMW your are going to buy next month, with the proceeds from your option trading. This is something that, at least in my experience, is very hard to find in the trading teaching and mentoring arena.

Excellent perspective from a pro market maker. Useful for the intermediate options student looking to “bring it all together”. I know the book looks homemade but inside it is a solid “A”. If you have already read Euan Sinclair, Jeff Augen, and Allen Baird, and you still can’t get enough market maker’s practical advice for the retail crowd, this book is almost to their level. 96.4% of option books are utter garbage, this was good.

I would highly recommend this book as a foundation of “any” investment(Stock, futures, but mainly options). Any material of Charles Cottle (Risk doctor) will be to your benefit in the long term(When I say the long term is because the learning curve relies on you). Options are not easy at first sight, and sometimes you may want to give up. I believe it is better to be patient and learn than lose money, which probably is going to happen if you do not follow the countless advice from Charles. He also has parts of this book with a video companion and exercises on Vimeo for an affordable price. On that page, he promptly answers any questions you have. Keywords from him: “Your opinion of the markets”……and “consciousness”.

I wanted to comment on my experience with the book and some of the other customer reviews.

You do not need to be a market maker or veteran options trader to read and get value from this book. I am a retail options trader, with a very serious full time job, and have virtually no mathematical aptitude, and I have already started benefiting greatly from the book.

In my opinion you should make sure you have basic familiarity with how options work, and some of the basic outright positions and spread techniques and what market view they support, and you will be ready to start learning what options are really about from there. You cannot go wrong by using this book and Mr. Cottle’s other materials as the very next step.

Be under no delusion—after the basics—options can get very complicated very quickly–if you let them. I have discovered, contrary to my initial impression, that Mr. Cottle in fact through the use of detail is really attempting to simplify option strategy decisions and trading itself. Through the use of what seems to be complicated examples—CC cuts through the fog and gets to the meat of options strategies and how and why one might choose one over the other–and invariably the best choice is something straightforward.

Based on what I know about him and my experience with his materials, he is committed to teaching. If you expect to read this book without pen and paper in hand, with little or no effort on your part, and have him simply say “do x and you will get rich” this book and his approach is definitely not for you. He is like any good teacher. He will make you work for the answer, but not leave you hanging when you struggle. In working for the answer—and having his approach, experience and techniques available–you will most assuredly gain a grasp of options and how to make money trading them that you never had before.

Don’t be intimidated when you first view the book. The presentation looks strange, the tools he uses will be different from those you have seen or used before, and the terminology will be strange to some. There is a reason he takes the approach he does and it will, with a modicum of effort, become clearer every time you are exposed to it and use it.

Here is what it has done for me.

It has forced me to actually think about what may be happening underneath the option quote and the day to day change in a position.

It has convinced me that trading outright positions whether short naked or long does not necessarily produce the best results. Yes longs are problematic due to all the standard theta reasons, and yes naked shorts are risky—we all know that—the trick is to figure out how to take the inherent advantages of either of these approaches, and make them work for your view of the market without getting killed in the process.

What he has made me a believer in is that risk can be reasonably controlled, while still making very attractive rates of return, and if you are looking for a method to make reasonable returns in the market, the raw tools are there for the taking.

He has convinced me that uncomplicated but well constructed spreads, for debit or credit, can actually allow me to participate in the market with a reasonable expectation of success, and allow me to sleep at night in the process without position adjusting every 10 minutes. He has also made me a true believer that options, by their very nature, provide huge flexibilities that outright underlying positions cannot, and allow much wider margins for error if I prove to be wrong in my view in any given position if they are structured correctly in the first place.

You do not have to be a rocket scientist to make money in options. In fact if you arbitrarily go out and sell an option this afternoon at random, odds are it will expire worthless and you will make money. The problem lies in the odds piece that is not in your favor. You also do not have to be a rocket scientist to get killed by these odds. Although small in most cases, when it goes against you—you will be dead unless you are very savvy and well prepared to deal with such an eventuality. This is the piece that CC is so good at getting at–managing the underlying risks in any given option situation, structuring the position correctly and buying or selling it right to hold as much risk as possible in check–while still giving you the opportunity to make some money.

The thing that finally made me a believer was the time he took to talk to me. He is not a prima donna. When I had concerns about spending even one more nickel on books, learning materials, educational seminars, etc. because so much of what I spent has been a waste of money and merely kept the educator in new Mercedes for so long—CC came through with flying colors. He took almost a half hour and spoke with me on the phone, and since then has never failed to answer a polite note or inquiry in his forum on his website Riskdoctor.com. He certainly is not getting rich from my buying the book or a seminar tape as his prices are very fair and honest. All these factors have convinced me that he must have the true teaching bug and his desire is to teach and help me improve.

He is not an easy taskmaster–and he is not going to tell you what to trade. He is a good teacher and like any good teacher he always tries to stay out in front of you a bit with his teaching and materials. This is a good thing for those willing to stretch just a little because the nuances start to emerge very quickly. The best part is he is there to get you untangled when you do get stuck in the weeds.

One more thing, after you read through the book once—go on his website and spend a little money and get one of his taped training sessions that he has actually done with live students [I started with Straddles and Strangles]. It will DEFINITELY help you clear some of the confusion that the book will inevitably create.

If you want to know more about options than any of these get rich books can ever tell you–buy the book—it will pay for itself many times over in your first couple trades, and the bonus is you will understand why it paid for itself, rather than your just having made a lucky guess or two.

Limited use in trading options.

This is the *ONLY* book on options one should ever refer to…sure, buy the others, learn a bit, THEN read this one! Charles teaches you not what “MIGHT” happen, but what “WILL” or “CAN” happen and how to avoid pitfalls that others do NOT mention or assume will not happen. Sure, it’s NOT an easy read; give yourself time…I did…and it will be WAY worth any amount of time you spend!…Happy Trading to all!

I have studied this book twice – cover to cover in succession. It is challenging, absolutely fantastic and I recommend this title to anyone wishing to further develop from their initial knowledge of options (gained elsewhere). This is not a book for beginners.

What I really liked:
– Practical floor trader examples.
– Trade Adustments
– Innovative pread strategies.
– Excellent coverage of the greeks (all non math explanations).
– Synthetic constituents.
– Position dissection – it has helped me think of positions in different ways and generate my own adjustment ideas.

Comprehensive discussion on main spread strategies.

This book is worth the effort.

Charles really does pick up where a lot of other authors leave people hangin. The information in this book has really transformed my trading and my options awareness. He’s not re-hashing the published works of others traders/authors here, his material is dense with lots of information related to his personal experience in the trading pits and the lessons learned while training many, around the world to become pit traders.

For people that are new to Options, this book seems like drinking from a fire hose. I, myself, am reading OTTHR for the 4th time. Charles really doesn’t hold back.

Overall this is an excellent book with lots of good information for someone who is serious about trading Options. It may take a couple of readings to lock-in the concepts but it will not leave you “hi and dry”.. Let me add also, that books of this caliber is not just for market makers.

Cottle shows some interesting trade setups and he is more knowledgeable than some writers, but he doesn’t cover any strategies from beginning to end. If you are advanced, this book won’t help much. If you are a newbie, then take a look and learn some different structures, just don’t have your hopes up that he explains how to trade them. Also, he doesn’t get into the second order Greeks of the trades like more knowledgeable instructors do. He misses some huge points about risk on many of the trade designs even though he calls himself the Risk Doctor.

Excellent book. I bought it more than 12 years ago, and actually met with the author at the CBOE in Chicago. For me the book has required reading many times over several sittings to grok. It has details on butterfly and calendar trades not available elsewhere (except through the school of hard knocks). I have tried to implement the strategies in software but there is insufficient information included in layman terms to be useful. It is written from a market makers perspective. I think it was written from a lot of the author’s trading pit notes and records. I have PhD in physical chemistry and much better than average math background, but it is still a tough read. The software that the author sells is very expensive and now (2023) the software is rather dated Java and Excel software. I wish there was more detail on workflow and adjustments over time for each type of trade. The diagrams are excellent and help with understanding many things. I refer to sections and re-read it periodically every year. I pulled it out again tonight to read up on trading skew. The book needs to be rewritten to be accessible to retail options traders. However, for the money it is still a “must read” book for options traders, and one of the best books that provides deep insight into practical market maker views and options trading in general.