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The Options Edge: Winning the Volatility Game with Options On Futures
 
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The Options Edge: Winning the Volatility Game with Options On Futures [Hardcover]

William R Gallacher (Author)
4.1 out of 5 stars  See all reviews (7 customer reviews)

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Book Description

With his take-no-prisoners 1994 book Winner Takes All, Bill Gallacher first carved out a reputation as a no-nonsense authority on the futures trading game. Now, with The Options Edge, he focuses on the world of options on futures, exposing the shortcomings of current theoretical pricing formulae and offering a simple, understandable, and widely applicable option pricing model without invoking any complicated mathematics whatsoever. Gallacher¿s watershed book represents nothing less than a new mindset for trading options on futures, a revolutionary approach that depends less on esoteric, theoretical abstractions and more on empirical evidence gathered from the real world of options trading.

From the Back Cover

Learn how the options market really works--and improve your odds of winning! As more and more "sophisticated" trading models are pressed into service to unravel the mysteries of market action, information overload makes trading markets progressively more unstable. Nowhere is this truer than in the option pits of the large futures exchanges, where traders struggle to put a price on uncertainty under conditions of great underlying price volatility--often using formulae of dubious value. In The Options Edge, professional commodities trader and researcher Bill Gallacher stands up and shouts, "Enough!" This extraordinarily practical book dowplays complex formulae and technical abstractions to explain option pricing form an empirical perspective, using an extensive futures and options database developed and analyzed during the years 1996 and 1997. Futures options traders needing down-to-earth answers to complex questions can look to The Options Edge for: a thought-provoking discussion and critique of the Black-Scholes option pricing formulas, and presentation of a much simpler and sounder alternative; identification of the at-the-money straddle price as the only true basis for estimating implied volatility of a commodity futures contract--and a fast and accurate way of calculating this number; historical volatility profiles for all the actively traded futures contracts; understanding of how one of the world's largest hedge funds foundered through its misapplication of the Black-Scholes formula. Profitably trade options on futures--simply, consistently, and without excessive reliance on algebra and complex statistical formulae--with Bill Gallacher's commonsense The Options Edge.

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Customer Reviews

7 Reviews
5 star:
 (2)
4 star:
 (4)
3 star:
 (1)
2 star:    (0)
1 star:    (0)
 
 
 
 
 
Average Customer Review
4.1 out of 5 stars (7 customer reviews)
 
 
 
 
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4.0 out of 5 stars Fast and enjoyable read, May 17 2002
This review is from: The Options Edge: Winning the Volatility Game with Options On Futures (Hardcover)
This book contains some very useful information for people who write options and wonder if their profitability is sustainable over the long run (hence the title "options edge"). Although Gallacher states that the edge between writers and buyers is zero (based on his empirical evidence); he illustrates that writers still can make consistent positive return on their trading, as long as they sell implied volatility which exceeds historic volatility and as long as they cover their short positions in options with futures at strike. Unfortunately, Gallacher doesn't compare LEAPS to futures as a way to cover short positions in options. An easy and enjoyable read!
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4.0 out of 5 stars Interesting book for option writers, May 13 2002
This review is from: The Options Edge: Winning the Volatility Game with Options On Futures (Hardcover)
This book contains some useful information for option writers who wonder if their profitability is sustainable over the long run (hence the title "options edge"). Although Gallacher states that the edge between writers and buyers is zero (based on empirical evidence); he illustrates that writers still can make consistent returns if they sell implied volatility which exceeds historic volatility and if they cover their short positions with futures at strike. The book is easy to read and I finished it in half a day.
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4.0 out of 5 stars yes, but the risk, Aug 22 2000
By 
V. Escobar (Ontario Canada) - See all my reviews
This review is from: The Options Edge: Winning the Volatility Game with Options On Futures (Hardcover)
The research work is better than most available and the writing very good (See his other book as well). However if somebody can answer the following: Isn't there a risk of blowing up the strategy with a string of limit days? They may be rare, but their effects are extreme (see Nassim Taleb's site and/or book). At one point limit days are mentioned; they are handled by using the price at the limit. This assumes that one can trade futures at the limit price, which is not a guaranteed thing. Otherwise, the new and refreshing look at option pricing is excellent. Clearly accuracy is more important than precision in markets with bid/ask spreads and Mr. Gallacher is able to cut to the core of the issue. Lots to consider, but that one problem remains.
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