Spot on for volatility trading
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This book is aimed at filling a gap in the current landscape of finance book: a quantitative approach to trading volatility.
So far one has the choice between an introductory (yet subtle) options book like Baird describing market making in options, or more abstract quantitative finance books focusing on option pricing formulas. Euan Sinclair's book focuses where the meat hits the table: options trading. Being the opposite of a recipes of dodgy trading systems, Volatility trading teaches the reader to be the chef preparing himself the quantitative sauce. Few trading books focus on understanding the basics of a sound trading approach, namely placing more emphasis on the process rather than the results.
After opening with an derivation of the black-scholes formula, the author addresses volatility measurements and forecasts. It is made sure that the reader understands the biases, pros and cons of all the standard volatility estimators. The basics of implied volatility dynamics are spelled out. Then hedging is thoroughly discussed, in particular the numerical approaches to 'real life' discrete hedging. Surprisingly, there is a chapter on money management, a important practical and often overlooked matter. Contrary to many trading book not going beyond simplistic approaches of betting, subtle properties of fractional and progressive money management are discussed. The psychology chapter is a nice review of the main behavioural finance topics. The rest of the book focuses on trade evaluation and the life cycle of a trade, in line with the spirit of the book: highlighting the processes.
Interestingly, this book can be of great help for the quantitative finance student who wants to understand more about trading - and it can patch their usual weakness in terms of not really understanding 'how the market works' which is common fresh out of university. It will also be of useful for the mathematically inclined finance student who wants to beef up its quantitative understanding of black-scholes. For practitioners of options trading, it is certainly a great review of the current way to build robust trading tools. The exhaustive references to the original papers alone make Volatility trading a valuable book. For traders focusing on other asset classes (like myself) it is a great opportunity to get an overview of how things are done in practice when evaluating an options trade.
In summary, whether you are a seasoned trader looking to improve your game or a student wanting to beef up for interviews, I highly recommend this book about volatility trading.
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sloppy production and missing spreadsheets...
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Sloppy production...many of the spreadsheets referenced and discussed... particularly Chapter 6... on Money Management and sizing of trades... though referred to ...just don't exist...or at least aren't on the disk
included..
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