Introduction
Emphasis on Process.
- "Many investors rely on methods that are either unproven or even proven to be ineffective. Few of these investors who keep records will see that they are failing, but rely on cognitive dissonance to continue to believe in their theory of how markets behave."
- "Trading is fundamentally an exercise in managing ignorance. Our ability to judge whether a situation presents a good opportunity will always be based on a simplified view of the world, and it is impossible to know the effects of this simplification. It is impossible to understand the world. If you insist on thinking in absolute terms, everything has shades of gray. You won't learn much from this book if you aren't comfortable with this."
- Process:
- Identify the edge
- Choose the appropriate option structure to monetize the edge
- Size the position appropriately
- Be aware of what you don't know
Chapter 1: A summary of options
Chapter 2: The efficient market hypothesis and its limitations
Chapter 3: Volatility Forecasting
Chapter 4: The Variance Premium
Chapter 5: Finding Positive EV Trades
Chapter 6: Volatility Positions
Chapter 7: Directional Options Trading
Chapter 8: Directional option strategy selection
Chapter 9: Trade Sizing
Chapter 10: Meta risks
Appendices:
- Adjustments to the BSM
- Statistical rules of thumb
- On execution