Book Review - McMillan on Options

Options Trading Book

McMillan on Options, Second Edition is considered by many to be THE bible on making money in the options market.  And with good reason: this humongous book has everything from the history of the options market to the various options markets as they exist today to the various approaches savvy traders have found to make money buying and selling these contracts.

Some specific topics the reader can dig into include:

• in depth coverage of major spreads. Any idiot can tell you a backspread has theoretically unlimited profit potential, but few will cover the impact of changes in volatility or other market conditions. McMillan does exactly that, and understanding his analysis is a huge boost to the option trader anxious to maximize his profit.
• coverage of exotic elements which make options trading so rewarding AND so confusing to the new trader.  The Greeks, how they are computed, which are mathematically solid and which are imputed - McMcillan goes into great detail for each and how folks like you and me can profit from them in our own trading.
• Coverage of the predictive power of options markets.  In this section, McMillan analyzes various ways the options market can be used to predict the future activity of specific stocks or entire indexes. Contract volume, volatility analysis, put-call ratio, etc.; each are covered in good detail. 
• Coverage of trading systems is also offered.  McMillan goes through a number of trading systems (not to be confused with a trading plan), showing their expectancy.  The reader may or may not want to use any the discussed systems as shown, but the trading systems he discusses offer some good material for possibly creating your own systems, or evaluating some of the many others offered for sale. 

Of course, each reader will have his or her own favorite chapter after reading this large book. Personally, I most appreciated the discussion around spread trading and delta neutral trades, as well as how the active trader can manage these trades to maximize profit and minimize risk.

Bottom line: this options trading book is simply one of the best in its class - if it is not on your shelf already, get it. If it is, read it again.  It houses critical knowledge.

Above all: stay timid!

Timorous