May

24

 I find that there is a much wider range of financial books available than a few years ago, when everything was Sage related ('when will this conglomerate reach its appropriate value at book?' etc.).

I recently bought Point and Figure Charting by Thomas Dorsey, which has a million anecdotes about stocks that worked out, with no tests whatsoever, but is suggestive. I also bought The Volatility Course by Geoge Fontanills and Tom Gentile, which has many strategies for staying the course in low and high volatility environments, a discussion of put/call ratios, and much discussion of implied versus historic volatility with the kitchen sink of chart patterns, Bollinger bands, and media to read and watch.

Fat-Tailed and Skewed Asset Return Distributions by Rachev et. al. contains a nice workman-like introduction, at a level just augmenting elementary statistics and statistical methods for understanding volatility. This appears to be a very useful addition to the quantitative traders collection. Also, The Encyclopedia of Trading Strategies, by Katz and McCormick, which I have bought five times already, but regrettably forget that it only covers data through to 1998, and has no awareness of the principle of ever changing cycles. It does however provide a reasonable methodology for finding systems that worked in different environments which could be ready to expose the fixed system trader to losses in future.

I believe that instead of reviewing these next, I'll review the Ring Lardner Reader which has many timeless stories from the 20's and characters that are similar to so many we meet with in trading today.

From Laurence Glazier:

I received a copy of The Volatility Course unexpectedly and enjoyed the read. It is to some extent an advertisement. Not unheard of in trading books. There is a useful table of optionable instruments to use, e.g., easy ways of trading the dogs of the Dow.

As for the basic premise that one should buy low implied volatility, if that were so, one would have to question the judgment of the selling market maker, or is that too simplistic? A better reason for me would be that there is less risk of volatility crush in the low IV purchase.

I like their risk profile charts but they are suggestive of risk from the outset of the trade rather than from the current position, so what appears to be a favorable graph may in truth be shouting, "Take some money off the table".


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