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Day Trading Options: Profiting from Price Distortions in Very Brief Time Frames Hardcover – Oct 2 2009

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Product Details

  • Hardcover: 192 pages
  • Publisher: FT Press; 1 edition (Oct. 2 2009)
  • Language: English
  • ISBN-10: 0137029039
  • ISBN-13: 978-0137029037
  • Product Dimensions: 20.6 x 14 x 2.3 cm
  • Shipping Weight: 295 g
  • Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
  • Amazon Bestsellers Rank: #117,263 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
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1 of 1 people found the following review helpful By Fenna Hersberger on Jan. 21 2011
Format: Hardcover
Great for an indepth understanding of day trading. Have
worked all the charts. Love that it uses Excel. Only
chart in the book I can't get to work out exactly is on p. 102--
comparing daily, intra-day and overnight price changes--
wondering if there is an uncaught typo in the data. The
concept is clear though. Great book, Jeff.
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Most Helpful Customer Reviews on (beta) 20 reviews
59 of 61 people found the following review helpful
Dense and intense material for the (really) experienced trader Oct. 19 2009
By Sreeram Ramakrishnan - Published on
Format: Hardcover Verified Purchase
Undeniably, this is the most densest book in a series of books by Augen that includes Trading Options at Expiration: Strategies and Models for Winning the Endgameand The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets and a workbook. This book is also perhaps the most targeted one and is unlikely to appeal to a broader audience.

The book in itself is fairly short (written with the gravity similar to academic journals) and has five chapters. The first chapter, though called "basic concepts" really sets the tone for the book and makes it evident that the intended audience is experienced day traders (true to the book title's implication). The chapter provides a very informed analysis of how options market (pricing) has changed in the recent crises, with specific focus on implied volatility swings and volatility skews across strike prices. The second chapter discusses automated trading and emerging trends in that field. Unless the reader uses sophisticated trading systems and is very familiar with programmed trading, the chapter is not likely to sustain significant interest, but the reader is well-advised to force yourself through the chapter. Using various detailed examples, Augen demonstrates the role of statistical analyses in trend exploitation, issues of "over fitting" indicators and volatility distortions. The third chapter (forming bulk of the book) deals with volatility distortions and how to trade them. The discussion is however based on 3-dimensional maps (implied volatility, calendar information and price) and is not really clear how accessible such tools are. Using various examples, Augen demonstrates approaches involving selling time decay and backspreads. The fourth chapter introduces a new charting tool with the premise that the principal goal of an option trader is to "arbitrage differences between implied and fair volatilities". Accessibility of the tools required and even suitability of these methods for the most aggressive casual trader (once whose primary job is not trading) is not clear here either. In the last chapter (perhaps, a neat set up for the next book?) Augen discusses special events focusing on only two - long weekends and associated price distortions and events surrounding markets "digesting" large amounts of news.

Overall, the book does absolute justice to its title - it is indeed targeting distortions for "very brief" (read minutes, mostly) and is fairly dense even for the experienced option trader. After having read all the books from the author in this field, the book on trading options near expiration was a far useful one for a broader audience in at least highlighting significant mechanics associated with expiration pricing dynamics and potential trade constructs. This book, Augen's dedicated focus on day trading, doesn't even pretend to be suitable for anyone but a niche audience. Augen does provide some interesting insights that will benefit any serious options trader, but this time, the book is perhaps a little too far out except for the very experienced and fanatic fans of Augen.
28 of 31 people found the following review helpful
Two key sections Dec 13 2009
By Jim Smith - Published on
Format: Hardcover
I manage a hedge fund that trades equity and index options. Augen's books are required reading for all our traders. The current book is by far the best. The most important sections for us have been the discussion about calculating volatility in different time frames and the detailed trend analysis using minute-by-minute price changes expressed in standard deviations.

Following the approach outlined in this book, we now calculate a stock's overnight, intraday, and close-to-close volatility. Comparing these values allows us to identify stocks that have large overnight risk or stocks whose options are underpriced during the trading session. We use this information exactly the way the book describes along with our own knowledge to structure trades that are statistically advantaged.

The trend analysis using minute-by-minute price spikes calculated in standard deviations is equally valuable. This approach has dramatically improved our day trading capability. We've been building on the idea using other indicators and time frames longer than 1 minute.

The book is a fine piece of academic quality work. It's far superior to the more common "get rich quick" style investment books that have little value for serious investors. But it's not for beginners. Like the other books in the series, it was written for serious option traders.
12 of 13 people found the following review helpful
Several books in one! Dec 3 2009
By Michael Benklifa - Published on
Format: Hardcover
Each chapter in this book really could be a book in itself. The first chapter on technical analysis actually made me laugh out loud. Mr. Augen applies popular indicators to randomly generated graphs to illustrate a point that he makes statistically, namely, stock prices do not contain information about what will happen next. Coming to terms with this reality should save investors a fortune. In the next chapter he then proposes a statistically based indicator rather than one based on moving averages. I've found it to be very predictive because it is based on the reversion to the mean concept. The third chapter is really fabulous for hard core options traders. Taking advantage of the differences between the intraday and interday volatility to create a day trading strategy is an opportunity not to be missed. I love these books that are intelligently written, not get rich quick, and very real world practical.
11 of 12 people found the following review helpful
It does have some good nuggets Nov. 30 2009
By A Georgas - Published on
Format: Hardcover Verified Purchase
I just finished reading Augen's latest book on options trading, and I would say it is worth a read. I can't give it 5 stars because it really doesn't give that much direction on entry and exit requirements. This is slightly disappointing. An unnecessary amount of pages are devoted to showing that the market is random, so you can't predict it. This book does detail how to use volatility to possibly spot changes trading patterns. It also details how to find possible volatility distortions. It is up to the reader to implement these methods with his/her own programming and back testing. Back testing will be crucial to implementing the strategies outlined in this book because there really isn't that much guidance on when to enter and exit trades trying to capture volatility distortions. You will have to build your own rules after back testing.

Overall, this book isn't overpriced for what you get, so I'd recommend it to anyone who has a good grasp with programming.
14 of 16 people found the following review helpful
Good but limited April 5 2010
By Leonardo Faoro - Published on
Format: Kindle Edition Verified Purchase
This book does not contain as much math and theory as I expected, so I could understand its contents well. However, it is very short, and really only discusses in detail his method using standard deviations, which is not bad.

Unfortunately, this book lacks more explanation on how to implement the method described(downloadable .xls ?). For the price it is worth it, but keep in mind that it has a limited amount of information that may be helpful.

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