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Investing/Strategies / Falling Knives
|Subject: interest in options....||Date: 9/3/2005 12:56 PM|
|Author: TMFMillerTime||Number: 356 of 14397|
I certainly am... and I don't know of any good text that suggests strategies for an equity value investing based analysis of option trading. Jim's suburb note on MMM is a fantastic template and example. I wonder if anyone would have an interest in a group effort going through one of the good option texts interpeted through a value investing viewpoint.
McMillen's book is great and I've read it but I think Natenburg's Option Volatility & Pricing would be a super text to go through on a chapter by chapter basis. **BOOK BLURB**
Anyone looking for a good introduction to options trading faces a crowded field of books. Most are atrocious get-rich-quick books targeted to unsophisticated individual investors. Fortunately for professionals, there are a few gems. If you are new to options trading, Natenberg's Option Volatility & Pricing should be the first book you read. It is practical, insightful, and will get you started in the right direction. It is also surprisingly sophisticated for an introductory text. I've been in this business many years, but Natenberg was still able to teach me a thing or two. This is the kind of book you should read twice: once when you are just starting as a trader, and again once you have had a year or two of experience.
The book is largely non-technical, although a wealth of important formulas are provided in appendices. It assumes familiarity with underlier markets, especially equities and futures. The first two chapters introduce basic concepts, exchange procedures and simple trading strategies. The meat of the book starts in Chapter 3, which is an intuitive introduction to option pricing theory. This leads into Chapter 4, which gives a detailed description of the quintessential options trading strategy—put on a position that the market has mispriced, and dynamically hedge it to expiration. The next three chapters elaborate, looking at volatility and the Greeks in more detail.
another great book is
Black-Scholes and Beyond:
Option Pricing Models by Neil A. Chriss
Chriss is the definitive non-technical introduction to option pricing theory and financial engineering. While other elementary books may oversimplify to achieve accessible explanations, Chriss does not. He uses mathematics as necessary, but stops short of using any calculus. Also, he is careful to explain basic concepts such as exponentials or probability distributions. The result is an extraordinarily good book that achieves a high degree of sophistication with essentially no technical prerequisites.
if anyone would have an interest... stand forth! I'd certainly love to have Jim, Cameron, and Kit helping to guide the effort if any or all have time.
it's just a thought but it might be both fun and very instructive
ps... for MBS, trep's mention of Fabozzi should be noted.
Handbook of Mortgage-Backed Securities
This has long been the bible of the MBS market. Unlike many edited collections, the chapters form a cohesive, well-thought-out whole. The book reflects tremendous practical experience. There are chapters on structures, including pass-throughs, PAC bonds, Z bonds, inverse floaters. Other chapters look at forms of collateral. There is a nice chapter on settlement procedures. Another looks at MBS credit analysis. Still other chapters look at special situations, such as rotating PSA environments or valuing low loan balance instruments. The book is primarily focused on United States markets, but there are nice chapters looking at markets in Germany, the Netherlands, Australia and Japan. My one criticism of the book is that its treatment of prepayment and OAS modeling is shallow—even for a largely non-technical book. Otherwise, this is an excellent resource.
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