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Book: Volatility Trading, + CD-ROM (Wiley Trading) :: Book
Date: Thursday, 08 January, 2009 :: 19:09
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Volatility Trading, + CD-ROM (Wiley Trading)
List Price: USD $65.00
from USD $34.52
Product Group: book
Manufacturer: Wiley
Studio: Wiley
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Editorial Review: Product Description
In Volatility Trading, Sinclair offers you a quantitative model for measuring volatility in order to gain an edge in your everyday option trading endeavors. With an accessible, straightforward approach. He guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation. In addition, Sinclair explains the often-overlooked psychological aspects of trading, revealing both how behavioral psychology can create market conditions traders can take advantage of-and how it can lead them astray. Psychological biases, he asserts, are probably the drivers behind most sources of edge available to a volatility trader.
Your goal, Sinclair explains, must be clearly defined and easily expressed-if you cannot explain it in one sentence, you probably aren't completely clear about what it is. The same applies to your statistical edge. If you do not know exactly what your edge is, you shouldn't trade. He shows how, in addition to the numerical evaluation of a potential trade, you should be able to identify and evaluate the reason why implied volatility is priced where it is, that is, why an edge exists. This means it is also necessary to be on top of recent news stories, sector trends, and behavioral psychology. Finally, Sinclair underscores why trades need to be sized correctly, which means that each trade is evaluated according to its projected return and risk in the overall context of your goals.
As the author concludes, while we also need to pay attention to seemingly mundane things like having good execution software, a comfortable office, and getting enough sleep, it is knowledge that is the ultimate source of edge. So, all else being equal, the trader with the greater knowledge will be the more successful. This book, and its companion CD-ROM, will provide that knowledge. The CD-ROM includes spreadsheets designed to help you forecast volatility and evaluate trades together with simulation engines.
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Reviews:
Average Customer Review: 
0 of 1 people found the following review helpful:
Summary: Re-stating the obvious....this is an excellent book and a must for options traders
Date: 2008-12-19 -
Comment: I have endorsed this book on the dust jacket already, so it is a bit of a wheeze to restate that this is an excellent, clear, and helpful book for those who (inescapably) take a position in volatility. This work is aimed for practitioners, and for those who are curious or students of the subject. But volatility market makers are the audience that should most welcome this work. Hull, Haug, Gatheral, Baird, and now Sinclair's Volatility Trading make up the short shelf of the best works in the field.
0 of 1 people found the following review helpful:
Summary: "Potpourri"
Date: 2008-10-02 - 
Comment: In "Volatility Trading" Euan Sinclair presents a compilation of the most notable features of many, many theorists. A lot of the theories have no practical value but they do make colourful commentary that leads to a meaningful conclusion. In addition he includes a potpourri of formulae including the Corrado and Su formula for including kurtosis and skewness in the normal Black Scholes Merton model call value. The Corrado Su skew curve, skew and kurtosis cones and volatility cones are included in files on the CD-Rom which accompanies the book.
Please note that Sinclair states that most of the information in " Options, Futures and other Derivatives" by John C Hull is prerequisite to reading his book. Sinclairs book is not suitable for beginners.
3 of 4 people found the following review helpful:
Summary: A Gem
Date: 2008-09-18 -
Comment: This is one of the best books I have seen on trading. Each and every page in this book has extremely useful information relevant for practical option trading. Author is clearly a successful trader himself is not afraid of giving insights he has got into the underlying behavior and corresponding option dynamics. It is however not an introductory book and probably needs to be read multiple times before one can assimilate the material enough to implement it in software to use it in practice.
I hope the author undertakes an effort to write a more comprehensive book on option trading which is not limited to volatility trading.
3 of 5 people found the following review helpful:
Summary: excellent book
Date: 2008-07-31 -
Comment: This is certainly one of the best books I read about Volatility. It is very practical and reveals a lot of details of the anatomy of trades, which were never covered in such details, in other books. I would like,however, to see the author make all his, software used, available to the public, in a software package that can be bought or licensed. Excellent book.
Tom Elias.
13 of 14 people found the following review helpful:
Summary: It takes a lot of experience, time, and energy to know - and I mean really know - what Sinclair shares in this book
Date: 2008-07-31 -
Comment: Over the course of my career I have come to own literally hundreds of books about derivatives pricing and trading. Few of these books manage to communicate the essence of what a professional derivatives trader needs to do to be successful. Volatility Trading is truly rare in that it presents a framework for analysis that is supported by a clear, well-defined trading philosophy: systematically find an edge and learn how to exploit it correctly. It takes a lot of experience, time, and energy to know - and I mean really know - what Sinclair shares in this book.
I found the chapter on volatility measurement and forecasting to be particularly useful. Few options traders take the time to understand the efficiency of their volatility estimators. Even fewer could clearly communicate that what we need is a view on the volatility distribution rather than a point forecast when we are trading volatility.
The author's mix of trading philosophy, quantitative intuition, and obvious trading experience is refreshing. The straight-forward no nonsense writing style also makes the book very readable. I would recommend this book to any quantitatively-minded trader. The chapter on money-management alone is easily worth the price of the book.
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