The Option Trader's Hedge Fund: A Business Framework for Trading Equity and Index Options

I just finished reading through Dennis and Mark's book and was struck by the fact that the authors tackled some rather complex subjects, but managed to keep the discussion at a level where it should be easily accessible to anyone with an intermediate understanding of options.As such, this book represents a excellent transition point for those traders who have begun to learn the fundamentals of options and are now ready to begin integrating options into all of their trading and investment activity.What this book provides is an overall blueprint for an individual to set up and manage their investment and trading capital much like an insurance company might sell policies, collect premiums, and manage risks. In fact, this is the premise laid out in the first chapter. The business model for "The One Man Insurance Company" (or TOMIC, as it is referred to within the book) involves the use of short option sales to generate cash while using long premium to hedge, limit and manage risk.Where The Option Trader's Hedge Fund separates itself from prior books is by taking a look deeper into the how's and why's of structuring trades. Rather than focusing upon market prices, TOMIC drills into the implied volatility of options to seek out advantages that might be exploited. It's the focus upon implied volatility that is likely to cause light bulbs to flash on above the heads of some readers. Using the discussion on volatility as a back drop, the authors then provide a run down of the five most commonly used option strategies within TOMIC along with suggested criteria for when these trades make sense and when they do not.There is also "nuts & bolts" advice about how to obtain better trade executions and demonstration of how these seemingly small savings can add up to rather significant amounts for an actively managed fund. The lesson here is that even if you're trading a small account on a limited basis, developing the skills now will pay much larger dividends as your account size and trade activity grows.Common questions are answered, such as a break down of how much capital a trader should have before trying to trade full-time and how a trader can protect their portfolio against sudden market declines such as the now infamous "Flash Crash". In short, this book represents a compilation of insights and advice that is not easily or quickly acquired. It's definitely a "must read" for the developing options strategist and trader.Christopher SmithTheOptionClub.com

I was looking more for a book on the business framework of trading options. And while it had some that, the book was more an advanced course on volatility trading options. I did distill some nuggets on businesses framework that did make the book worth the investment.

This is a book that every options trader should read. I have read it twice and use it regularly as a reference - it is that valuable to me.I have read most of the top books on options that are available, but this one stands out in it's practicality and it's ability to lay out a solid framework for options trading as a business. Where most books either stay too theoretical, rely too much on analogies, make unrealistic promises, or focus too much on a single strategy I find The Option Trader's Hedge Fund gave me not only the theory but also practical information that has improved my trading.Of particular value is the explanation of the various positions that may be traded along with under what conditions it each position will perform best. Beyond that there is a discusion on managing each type of position, such that a clear plan is laid out for most situations you might encounter. What I find particularly unique and valuable are the details on how to adjust each position for various circumstances along with the setup of what volatility environment and skew curves work best for each position. This level of detail is not something I have found in any other books on the subject - at least not presented in such a practical way.This book has improved my trading and saved me many times the price just in helping me learn how to better manage positions I was already trading. It's been even more valuable by helping me identify under what conditions I should be trading various positions. I view it as essential reading for anyone trading options. Of all the options books I have read, this one is the most useful and valuable to me. This is the one I pull out when planning trades. This is the one I pull out when I need to manage or adjust a position. I'm just a regular guy with a famly and a job who's doing his best - maybe if you are a pro it's not as valuable to you, but for me it's the most valuable options book I have.I am also grateful for The Options Insider radio and The Option Block podcast and Mark Sebastian's contributions to those free resources. That's how I found out about this gem!Sean Conrad

High quality book with well written examples of trades. However, it’s addressed rather to intermediate/advanced traders who feel the need to improve the structure of their trading activities. The One Man Insurance Company framework might be exactly what they need.

I am an options spread trader of many years and will generally buy and read anything relating to spreads, particularly iron condors, as continuing education. This is by far the best book I have ever read, indeed I was so engrossed I read half of it in one night. Then I woke up in the morning and finished it. How many times does a book grab you like that? It is not for beginners; it doesn't explain basic concepts. Rather, it is for the experienced trader looking to build a sustainable business. Many of the concepts you may already know (eg, position sizing) but are discussed from a very interesting point of view: looking at the net options seller as analogous to an insurance company. The authors call it "TOMIC" ie "The One Man Insurance Company." If you trade verticals or butterflies or iron condors as a business, this book will help you clarify the actual business part. We tend to focus too much on watching the market and reading the news and studying charts--we tend to focus on trading. We tend to neglect the actual business. This book will help take you to the next level--from trading, to a real sustainable business. Think of it as an option trader's MBA. Stop everything and read it.