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Option Trader's Hedge Fund, The: A Business Framework for Trading Equity and Index Options
- By Dennis A. Chen, Mark Sebastian
- Published May 18, 2012 by FT Press.
- Copyright 2012
- Dimensions: 6" x 9"
- Pages: 240
- Edition: 1st
- Book
- ISBN-10: 0-13-282340-3
- ISBN-13: 978-0-13-282340-1
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Product Author Bios
MARK SEBASTIAN (Chicago), COO and Director of Education, Option Pit, currently manages risk for a private hedge fund. A former market maker on the CBOE and American Stock Exchange, he started the blog Option911 (now OptionPit.com), has been published on Yahoo Finance, is featured on TheStreet.com, SFO Magazine, and OptionsZone, and is managing editor for Expiring Monthly.
DENNIS CHEN (Miami), Managing Director of Smart Income Partners, Ltd., is an experienced investor, entrepreneur, and advisor. He has 15+ years experience investing in equities and trading options; served as management consultant at Bain + Company; and holds an MBA from Wharton.
In this book, a hedge fund manager and an option trading coach show you how to earn steady, reliable income selling options by managing your option trades and running your option portfolio as a real business with consistent, steady returns. Packed with real-world examples, the authors show you how to manage your own “one man” hedge fund and make consistent profits from selling options by applying the basic framework and fundamental business model and principles of an “insurance company”. This framework helps you to apply your option trading strategy to a solid, predictable, business model with consistent returns. For someone who has some knowledge of trading options and wants to become a consistent income earner. The authors provide a complete “operations manual” for setting up your business. Gain pearls of wisdom from both a professional options trader and coach, and from a hedge fund manager focused on managing an options based portfolio.
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24 of 25 people found the following review helpful
good framework, short on details, By
This review is from: The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options (Hardcover)
Customer review from the Amazon Vine™ Program (What's this?)
Apart from the very good comparison with the (re)insurance model (chances are an experienced trader implicitly follows this model) and a trading framework (more of an outline of the framework listing a collection of questions), an experienced reader/trader will be hard pressed to find any new information or insights for new trading strategies. Being a devoted reader of Jeff Augen, I was disappointed not to find any new valuable information, given his endorsement of the book.For an beginner to intermediate level reader, the authors provide an excellent comparison to the insurance model and then provide a series of questions that can help create a trading plan. The experienced trader is not likely to benefit for the most part of the first 7 chapters. The authors provide a good summary of key strategies (nothing new) with a few insights on timing of the trades and good discussions on gamma scalping, impact of weekend, skews, etc. However, the details are sketchy and the... Read more
10 of 11 people found the following review helpful
Income genreation through option strategies, By
This review is from: The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options (Hardcover)
Customer review from the Amazon Vine™ Program (What's this?)
This book explains to readers how to structure option plays for income generation for minimum risks by having hedges in place. Vertical spreads, iron condors, butterflies, calendar spreads, and ratio spreads are covered in this book and the authors show how to build these option strategies, at what point to take profits and when to cut your losses if the market does trend to where you are not profitable in a particular trade.The book is written to explain the concept of the "one man insurance company" (I am not sure how female option traders will like that name). The concept is to collect premium from option buyers in exchange for the risk of losses in the underlying markets that the options were written on and earn profits from the time decay of the options that were written for the buyer. So the concept of the book is to be short option premium, to sell theta and vega in low probability situations and collect profits as the short options deteriorate in value as their... Read more
7 of 7 people found the following review helpful
Good Book but Too Brief On Topics, By Norman "TrendRider" (Virginia United States) - See all my reviews
Amazon Verified Purchase(What's this?)
This review is from: The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options (Hardcover)
I am not a professional options trader but learning. The concept of comparing options trading to an insurance company makes a lot of sense when you think about it. My main complaint is that the book often rushes through a topic without adequately explaining it. I kept getting the feeling that this book was just thrown together. Most of Part III is actually postings from Sebastian's blog. The book covers some topics such as unit options that are new and potentially very useful to me. Aso some of the blog postings are very useful. However, the book was originally listed as being over 300 pages long; it would have been better to me if the authors had kept writing with more examples.
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Online Sample Chapters
The Option Trader's Hedge Fund: An Insurance Business Case Study
Table of Contents
Introduction 1
Part I: The Framework
Chapter 1: The Insurance Business 5
Chapter 2: Trade Selection 19
Chapter 3: Risk Management 31
Chapter 4: Trade Execution 43
Chapter 5: The Trading Plan 55
Chapter 6: Trading Infrastructure 63
Chapter 7: Learning Processes 73
Part II: Implementing the Business
Chapter 8: Understanding Volatility 81
Chapter 9: Most Used Strategies 89
Chapter 10: Operating the Business: Putting Together TOMIC 1.0 from A to Z 121
Part III: Lessons from the Trading Floor
Chapter 11: Lessons from the Trading Floor on Volatility 131
Chapter 12: Lessons from the Trading Floor on Risk Management 145
Chapter 13: Lessons from the Trading Floor on Trading and Execution 155
Chapter 14: Lessons from the Trading Floor on the Other Greeks 173
Chapter 15: The Beginning 191
Appendix A: Recommended Reading 195
Appendix B: Strategy Learning Sequence 199
Appendix C: OptionPit.com 201
Appendix D: Kite Spread 203
Index 205
Sample Pages
Download the sample pages (includes Introduction, Chapter 1 and Index)
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