 | Summaries and Customer Reviews are supplied by Amazon.com | “Learn and profit from Jeff Augen’s book: It clearly explains how to take advantage of market inefficiencies in collapsing implied volatility, effects of strike price, and time decay. A must-read for individuals who are options oriented.” --Ralph J. Acampora, CMT, Director of Technical Analysis Studies, New York Institute of Finance “A fantastic, insightful book full of meticulously compiled statistics about anomalies that surround option expiration. Not only does Augen present a set of effective trading strategies to capitalize on these anomalies, he walks through the performance of each across several expirations. His advice is practical and readily applicable: He outlines common pitfalls, gives guidance on timing your executions, and even includes code that can be used to perform the same calculations he does in the text. A thoroughly enjoyable read that will give you a true edge in your option trading.” --Alexis Goldstein, Vice President, Equity Derivatives Business Analyst “Mr. Augen makes a careful and systematic study of option prices at expiration. His translation of price behavior into trading strategy is intriguing work, and the level of detail is impressive.” --Dr. Robert Jennings, Professor of Finance, Indiana University Kelly School of Business “This book fills a gap in the vast amount of literature on derivatives trading and stands out for being extremely well written, clear, concise, and very low on jargon--perfect for traders looking to evolve their equity option strategies.” --Nazzaro Angelini, Principal, Spearpoint Capital “Instead of considering macro-time strategies that take weeks to unfold, Jeff Augen is thinking micro here--hours or days--specifically the days or hours right before expiration, and harnessing grinding, remorseless options decay for profit. He builds a compelling case for the strategy here. The concept of using ratio spreads plus risk management for as brief a period as one day--open to close--to capture expiring premium is worth the price of admission alone. A superb follow-up to his first book. Must-read for the serious options student.” --John A. Sarkett, Option Wizard software Equity and index options expire on the third Friday of each month. As that moment approaches, unusual market forces create option price distortions, rarely understood by most investors. These distortions give rise to outstanding trading opportunities with enormous profit potential. In Trading Options at Expiration, leading options trader Jeff Augen explores this extraordinary opportunity with never-before published statistical models, minute-by-minute pricing analysis, and optimized trading strategies that regularly deliver returns of 40%-300% per trade. You’ll learn how to structure positions that profit from end-of-contract price distortions with remarkably low risk. These strategies don’t rely on your ability to pick stocks or predict market direction and they only require one or two days of market exposure per month. If you’re looking for an innovative new way to reignite your returns no matter where the markets move, you’ve found it in Trading Options at Expiration. -
Why traditional option pricing calculations always break down in the final days before expiration
Three powerful end-of-cycle effects not comprehended by contemporary pricing models -
Reducing your risk by reducing your market exposure
Trading only one or two days each month and avoiding overnight exposure -
Structuring trades that reflect true expiration-day behavior
Leveraging the surprising power of expiration-day pricing dynamics |
Average Customer Rating:    Nice focus but difficult to execute today I liked this book. I liked how it focused on such a specific element: trading options near expiration. I only gave it 3 stars because actually pulling off some of the strategies is quite difficult especially in today's lower volatility environment. Some focus on higher level maths may also turn some readers off. Overall I think it is a good addition to a trading library and any reader will benefit from some of the knowledge and ideas contained in the text my favorite I found the book difficult to understand, but then I realized it is the subject, not the writing, that is hard. The author does a remarkable job of explaining his approach. I would rate this the best book on trading I have found in years. Closest thing to a cookbook guide for expiration week option strategies I have and I have read my fair share of options books, but this little title was an eye opener and my best trading investment to date.
Jeff Augen has taken the time to study, analyze and put in paper for the rest of us a thorough description of option market phenomena (pricing efficiencies) that take place during options expiration week, especially expiration Thursday and Friday.
These efficiencies are the way the markets -that is, human traders, market makers and the systems they have built- compensate for the differences between the theoretical options pricing models and the real risk (or relative lack thereof) carried by an options contract that approaches expiration.
Options models like Black-Scholes-Merton assume a continuously (i.e. 24h/day) traded instrument and "frictionless trading" - i.e. no fees, no spreads and infinite liquidity. These assumptions do not hold in general, but they get totally disconnected from the trading reality during the last days in the life of an options contract. As expiration gets closer, "dead" (i.e. non-trading) time becomes an increasingly larger amount of an option contract's value. Market makers and traders respond by progressively varying implied volatility, which is the only non-deterministic variable in the options pricing formulas.
This tug-of-war between options sellers and options buyers creates a predictable pattern of implied volatility behavior during expiration week. The pattern is in itself a market efficiency: it's the way the market has come up with for adjusting the risk closer to reality, so it persists across expirations. The pattern's "depth" is relatively limited, in the sense that it does not represent an opportunity to institutional-size investors. That is why it is allowed to persist, after all. But it does represent a great opportunity to private traders who will take the time to study it and trade around it. Jeff's book lays the groundwork for it all.
This is a small and simply written book but not an easy book to digest due to the huge distilled experience it conveys. I have more than once had repeated "aha!" moments from the very same lines when revisiting (repeatedly) the text after a few more trades. So it pays to revisit it regularly.
So, this is a cookbook in the sense that you must know about cooking and are willing to experiment a little. In this respect, I disagree with the reviewers that claim the bar is set too high for the "average options trader". It is definitely exploitable "as-is", without going into the full length of duplicating the author's data and volatility decay curves. All it takes to verify is having a feel or a good understanding of the behavior of the suggested trade structures (long ratios, straddles) and try a few small or paper trades - live on an expiration day. Some recipes are easier than others, and this book is about exploitable market phenomena that are allowed to persist and repeat because they represent efficiencies to the system. So the distance between being "average" and "successful" is of the shortest ones you can find.
That said, the book might be enhanced in a second edition by adding some more detailed explanations of the underlying math; For example, I happened to find out that the "noise" in the implied volatility curves that another reviewer (Christian Farman) mentions can be reduced significantly if not eliminated when one calculates it exclusively using the out-of-the-money option; Close to expiration, time premium is so thin that the in-the-money bid-ask spread crossing when trading is enough to corrupt the in-the-money contract's implied volatility curve.
Bottom line - if you are or if you are willing to become your own trader, this book is bound to save you an awful lot of research and make you look forward to the next expiration week as a good risk-reward, recurring money-making opportunity - the closest you can come to something resembling a salary in this business. As for the "erratic options week behavior" most financial journalists love to report on - there is method in the madness, and a lot of the hows and whys are written in this little gem. An unambiguous five stars, as far as I am concerned.
Excellent book, needs better editing. Unless I am missing something, this is pretty much the only book on this subject. And what a subject it is. Most option traders are desperate to get out on expiration day if they still hold same month options; this author says this is the day to get in! I plan to use his strategies to see if they work; based on my previous experience, I believe that they will as most options are absolute true value on Friday morning of expiration day and even a small underlying stock price change does impact the option price dramatically. An excellent book, well worth reading. I would have liked to see slighty clearer language and perhaps better summaries at the end of each chapter. However a valuable addition to the subject of options. Useful but misleading This book contains ideas that worth exploring. However, the presentation is extremely misleading. The author tends to present trades that worked under a specific scenario without devoting a fair space to analyze the risk involved. A novice trader could be easily mislead by the mirage of easy money. Although the author touted the attractive risk/reward ratio of his strategies through the book, no systematic analysis of risk/reward is included. In order to make use of the ideas, readers need to fill in the details of a strategy (entry/exit/etc), and have a back test plan to find out what the true risk/reward ratio is. Unfortunately the data needed for such an analysis is prohibitively expensive. If you are starting out with options, please DON'T read this book! It WON'T help you AT ALL! If you are well versed in option greeks and strategies, this book may give you new ideas to think about. Lastly, I borrowed this book from a library. |  |
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