Volatility Trading, + Website 2nd Edition

To start, Volatility Trading by Euan Sinclair is one of the BEST if not THE BEST book in the market place on the topic of Volatility Trading. I have read the book multiple times. There is so much value to be gained by reading the book that I'll probably read it multiple times again. Relative to what is out there in the market place, this book is far and beyond and also much more applicable to use and enhance a trading strategy. In total the book is extremely strong but I'll highlight my favorite areas. Volatility Measurement, Stylized Facts about Returns and Volatility, Volatility Forecasting, & Implied Volatility Dynamics were extremely meaty chapters but in a good way; large value added, read them. Euan actually does something most writers can't do. Most books in this area on the market place are so theoretical; when I first read Volatility Trading it was a breathe of fresh air to the highest extent. A book that applies the theoretical side but with very real world applications that also have the ability to enhance one's risk-adjusted returns; in other words, this book adds value massively to your P&L. Highly useful and applicable information to better your game and gain an edge in the market place. The Chapter on Hedging was exceptional, that chapter was fantastic in going through the different hedging methodologies he covers, once again, clear value added chapter. Of course, there are others but this was an excellent chapter and I highly suggest taking it to heart. The Distribution of Hedged Options Positions was a great read. The Money Management chapter absolutely had real value to be gained but the Trade Evaluation chapter could be the most valuable in the entire book and that doesn't de-value the value gains from the other chapters. There is so much to be gained from this chapter to analyze and evaluate ones performance of their trading strategy. Trade evaluation is an extremely valuable chapter. The Psychology chapter was a great read, more real applications and enhancing material. The Generating Returns through Volatility was absolutely fantastic, great again. In general, without re-writing the book in the review, the book is a MUST READ. If you are a money manager, if you are a trader, if the financial markets are how you make money and you haven't read this book then in my opinion you are doing a disservice to yourself, your payout, and your clients/shareholders. There is so many ways to enhance ones game in this book to have more of an edge in the market place that the fact Euan wrote this book and gave it to the markets is a gift in itself. Be thankful he wrote this book. In conclusion, I used value added, value gained, fantastic, great, exceptional, performance enhancing and repeated them for a reason, that's because its true. If you want to improve your game, and of course, potentially improve your P&L then read this book. I hope this review is helpful for people out there.

The second edition of Volatility Trading by Euan Sinclair is one of the most comprehensive and insightful books on volatility trading that I have ever read. While the book uses formulas to convey mathematical and theoretical concepts, the insights in the book were clearly gained from years of practical trading experience.The author wisely begins with an explanation of the Black-Scholes-Merton and even more importantly includes a discussion of the BSM model assumptions and its deficiencies. In his chapter on "Stylized Facts about Returns and Volatility," Sinclair explains how volatility actually behaves in the real world and offers numerous graphs to illustrate these relationships. "Implied Volatility Dynamics" goes into even more detail on how implied volatility evolves over time.I particularly enjoyed his chapters on "Generating Returns through Volatility" and the "VIX." These chapters investigate the variance premium, its sources, and how to exploit it in practice.There are many pearls of wisdom in the book, but perhaps the most important is Sinclair's continuous emphasis on the need to identify and systematically exploit a trading edge. When trading options, this typically means exploiting anomalies between implied and forecasted future realized volatility.Finally, Sinclair goes beyond volatility trading and includes several detailed chapters on risk management, position sizing, and psychological pitfalls.I have been an investment professional for over 30 years and still found new insights in this book as well as several interesting research and strategy ideas to explore.Brian Johnson

The author is a physicist who is a trader by both have avocation and vocation. His analysis of all aspects of volatility is beautifully done and described. Yes, there is mathematics involved, but it is mostly from a practical, trader's perspective and not from a theoretical financial engineers perspective. Even if the math is too much for you, the text summarizes the key points and implications in words and with trading examples from the authors own experience.I am in intermediate trader with a scientific background. I will be going back to this text as my experience grows, to absorb the finer points presented here. It is not an easy read but a definitely worthwhile one.In addition, The last chapter is a summary of books, articles, and websites the author has found useful. I wish more authors of trading texts would do this for their readers: a very valuable feature.Anyone trading volatility or wishing to learn about volatility should have this book on their shelf and read.

This is neither a "get rich quick" book nor an elementary introduction to options. The author assumes a fairly solid background in options, including the details of the Black-Scholes-Merton model, option Greeks, and familiarity with the payoffs of various common option strategies. This is is a survey of how to trade volatility as an asset class using options as a vehicle. The intermediate to advanced trader will find much to like here, while the novice may seek clearer, more detailed explanations elsewhere. I particularly liked the chapters on Money Management, Trade Evaluation, and The VIX. The chapter on Implied Volatility Dynamics was also good. The chapter on Psychology was yet another rehash of the same old material, but is worth reading. Sinclair, a PhD in theoretical physics, was obviously holding back on the level of his mathematical exposition, which while diminishing the appeal of the book somewhat, makes it accessible to a wider audience. Though lacking in some areas, I give it five stars for the clarity of the writing and the singular focus on volatility as the single most important determinant in option behavior.