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Monday, January 22, 2007

Profit With Options

This book is by Lawrence McMillan and he is widely regarded as one of the best in the options field. His other book "Options As a Strategic Investment" is also nicknamed as the bible of options education, even by professional traders.

Especially for those of you who already have basic knowledge on options, this book is a good complement. McMillan talks about how he uses options as a direct indicator and as contrary indicator. I find the section on how he uses options as direct indicator for insider trading particularly interesting. Not only did he cover what indicators or criteria to look out for insider trading, but he also highlights how to filter out noise to have a higher probability of insider trading setups, and not merely rumours you read on front page of some newspaper or magazines.

For those of you wondering why Option Expiration is important and its effects on stock market, be sure to read chapter 4 on System Trading. There are a few system trading being discussed in this chapter, but what I find most insightful is the section where he explains how to determine if there will be arbitrage buy/sell programs that is large enough to influence stock market on expiration day and how you can profit from it.

The last two chapters are concentrated on volatility and discussing a few of his favourite strategies and outlines the criteria for entering them. As always, there is so much more to volatility and I picked up some lessons from here as well.

A feature of this book is the review questions at the end of each chapter, with answers and explanation at the end of the book. Honestly, I never bother to go through them because this reminds me of studying for exams. But if you have time on hand and want to test your understanding, then why not?

If you're a McMillan fan or want to build on your knowledge on options, you'll probably like this book. I'll try to throw in some gold nuggets that I've gotten out of this book here, so stay tuned!

Grade: B+


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