Preface to Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions
- Mar 2, 2011
All books are largely an extension of their authors. So we'd like to briefly describe ourselves and thus inform you, the reader, about our perspective.
Ping Zhou is a portfolio manager for the Quantitative Investment Group at Neuberger Berman, a major asset management firm. He is a true "quant" who uses sophisticated statistical, empirical models to squeeze profits out of the market. His days are spent with fellow PhDs, performing the highest levels of quantitative analysis. He has access to an incredible arsenal of computing power and resources.
John Shon is a professor of accounting at Fordham University. He was formally trained for his doctorate at the University of Chicago's Booth School of Business in high-level theoretical and quantitative analysis, under Nobel laureates in economics and finance. He spends his days performing cutting-edge academic research using sophisticated statistical procedures, and he regularly publishes in top academic journals.
On the surface, the two of us are in very different fields. Yet, one of our commonalities is our exposure to quantitative sophistication. Perhaps ironically, then, one of the key traits we share is our belief that, in certain scenarios, rigorous quantitative analysis can be overdone. We believe in Leonardo da Vinci's famous saying: "Simplicity is the ultimate sophistication." Put differently, we believe in the adage commonly referred to as KISS: "Keep it simple, stupid." This shared philosophy is at the core of our writings. Many options-trading books overwhelm the reader with what we believe are unnecessary complexities. In this book, we whittle to the bare essentials the types of trades that will be profitable. We have made every effort to pare away complexities and show the essence of each trade. As such, we spend very little time discussing the greeks of options analysis—delta, gamma, theta, rho. Don't get us wrong: understanding the greeks is important for a full understanding of your trades. However, we believe that many of these issues can obfuscate and distract you from our main task at hand, so we suggest that you acquire this information elsewhere to supplement the material we cover here. Two excellent books that cover basic concepts are Options Made Easy and The Bible of Options Strategies, both by Guy Cohen. They'll provide you with some of the foundational knowledge you'll need. Two essential books that cover advanced concepts are The Volatility Edge in Options Trading and Day Trading Options, both by Jeff Augen. They discuss many of the volatility-related issues that you'll want to deal with, as well as the details of intraday trading.