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Volatile Markets Made Easy: Trading Stocks and Options for Increased Profits

From FT Press

Author : Guy Cohen
Binding : Hardcover
DeweyDecimalNumber : 332.632283
EAN : 9780135138410
Edition : 1
ISBN : 0135138418
Label : FT Press
Manufacturer : FT Press
NumberOfPages : 368
ProductTypeName : ABIS_BOOK
PublicationDate : 2009-05-29
Publisher : FT Press
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Customer Reviews

Rating:
Summary: Good follow up to previous book
Comment: I read this book after his earlier book "Options Made Easy" ,which paved the way to get more out of this book. In adition to the well presented standard fare in options books, the author also addresses the psychological aspects which can be half the battle when trading. The examples presented were beneficial and,as a learner,the more the better. Again, a good read coupled with his earlier book.
Although it is not necessary for an option trader to understand the mathematics behind the option models used, the author does include equations which is quite helpful in my opinion. The reason for this is that any trading strategy is used more appropriately if the trader understands the math behind it.
I have had better profits selling options when volatility is high and moving lower and buying them when volatility is low and expected to go higher.
His statement "if volatility in the market continues to rise , then buying these options will be rewarded by higher premiums,provided the implied volatility of the options follows suit" seems to advocate buying options when volatility is high and expected to go higher. In my experience this is a dangerous strategy since if volatility collapses the option premiums will collapse with it and you are likely to face a loss quickly.This is especially true if you bought an option during a period of high volatility.
Also I wished the author mentioned the effect of lopsidedness in open interest between puts and calls on the likelihood of a specific option expiring worthless. I read this in another book and was amazed at the accuracy of this approach in predicting whether the puts or calls are more likely to expire worthless .
Even with the minor critical comments the book is still worth reading.
Rating:
Summary: Volatility - I can see you clearly now!
Comment: If I were to characterize Guy Cohen's book 'Volatile Markets Made Easy' by a single word, it would be 'Clarity'. Investors/traders who are relatively new to Options, would be well advised to read Guy Cohen's earlier book 'Options Made Easy' (published in 2005) before reading 'Volatile Markets'.

Trading is always profitable, if you get the direction right (usually Up for long Calls and Down for long Puts). When you get it right, have a plan for taking profits. For those times when you don't get it right,
Guy has a good suggestion: Base your Stops on stock price and not on the option price.

The discussion on Greeks is excellent; the graphics (screen shots) would be easier on the reader's eyes and brain if they were a bit clearer. Of course I am picky about clarity, because I am spoiled by the absolute clarity in Guy's writing. For example, while discussing implied volatility Guy writes: "If volatility in the markets continues to rise, then buying these options will be rewarded by higher premiums, provided the implied volatility of the options follows suit."

Although Guy seems to prefer simple line diagrams (example Figure 4.1 Straddle Components) I would recommend a forward reference to Figure 4.6, p111 which better illustrates the relative axes positions essential for the understanding of the Straddle risk profile. The same applies to Strangle (Figure 4.2 vs. Figure 4.19).

I am somewhat puzzled by the section `Adjusting Trades and Gamma Trading' (p 129), which does not appear to meet the clarity standards I expect from Guy's writing.

While most authors shun using mathematical equations, I appreciate Guy's daring inclusion of Option Pricing Models (Black Scholes and the Binomial model). This will encourage at least some readers to be exposed to `what creatures these pricing models are', in spite of lack of inclination to grasp the concept in detail.

Perhaps the best one learns by reading Guy's books is his simple trading philosophy: "... by taking profits early, we remove stress from our trading even if it means we don't make the maximum amount from each and every successful trade." I couldn't agree more since `no one goes broke taking profits'.

Options Made Easy: Your Guide to Profitable Trading (2nd Edition)
Option Spread Strategies: Trading Up, Down, and Sideways MarketsOption Spread Strategies: Trading Up, Down, and Sideways Markets
Rating:
Summary: Best options book for today's volatile markets
Comment: Guy Cohen has written an incredibly good book concerning today's volatile markets. Throughout the book he gives exact examples of what option strategy to use to maximize your profit and minimize your risk. He gives real insight into the psychology of the markets and how that interplays your timing of your entry and exit of a trade.

The book not only explains exactly how to use well-known volatility strategies like straddles and strangles, but also compares them in detail to ratio-backspreads where he shows how risk can be even better mitigated. That is one of the unique areas of this book and one of the most valuable.

Another thing I liked is the author's intimate understanding of your emotions when a trade is on, and how to manage your trade practically so you retain your sanity. He explains that the biggest losses tend to come where a trader doesn't grab the opportunity to take a profit when it presents itself. How true that is! This forms the essence of Cohen's trading plan to take some profits off at a conservative initial profit target, but allow the remainder to trail any remaining profitable movement for a potential "windfall" gain. In trending markets this trading plan is golden. In rangebound markets the trading plan will keep you out of too much trouble.

I recommend this book for the beginners as well as the seasoned traders. Volatile Markets Made Easy will certainly help you make money and is a must read book for these volatile crazy markets.
Rating:
Summary: Perfect Book for the Volatile Markets
Comment: Back in the 1980s a move in the Dow Jones of 50 points was considered big. Since the collapse in 2008 and rebound in March 2009, volatility has been constant in the marketplace and Guy Cohen's book leads the way in demonstrating how to take advantage of the wild swings in the market.

If you don't know how to profit from explosive movements up or down or have a history in mutual funds or buying stock alone then this is a must-read book for you. With an established track record in making options easy and accessible to the retail trader, Guy Cohen builds on earlier work to provide key insights that every trader and investor should know. A must read for all who are seeking better control of their own financial futures.
Rating:
Summary: Impressive - every trader should read this!
Comment: I can honestly say that I was suprised how much I did not know about trading the stock market when I started reading Guy Cohen's book.

I have been trading the markets for some years and have been generating quite a decent income from it just by applying a couple of very simple strategies. However, like most traders, my trading has always been plagued with some common problems: being stopped-out too early and too often, my entry order being triggered prematurely and then the market turning against me, not knowing when to take a profit and then finding myself leaving money on the table.

I have to say that had I read this book ten years ago, I would not have made so many mistakes in my trading. Guy Cohen explains that there is actually indeed a solution to the problems mentioned above. For example, he explains how by trading flag patterns (in the style that he trades them) we can avoid prematurely entering a position, whether long or short. Furthermore, I am convinced that following his strategy, there is indeed a way we can significantly reduce the rate at which we are stopped-out of a trade. For example, he explains very clearly there is a science to placing your stop-loss depending on what you see on the chart. Plus I now have a clear plan as to when to take profits.