FT79, If you can duplicate your seller friendâs strategies successfully, and comfortable with it, fine. What is his strategy? May I suggest you keep an open mind re potential positions? Selling premium is only one approach. There is potential in flat, trending, low vol, high vol markets. I agree with yip1997. I would also suggest a programme to constantly monitor positionsâ exposures, plus a stress testing feature. Grant.
After Natenberg I would agree that Cottle's book is a good next step but you have to realize that you there is not so much more detail in volatility and greeks after Natenberg and Cottle, the real learning is in aplying it and going forward in the practical side. Just a note on my book, it is not focused on Greek based adjustments, but more on adjustments from the P/L and risk/reward point of view. Also we did not cover in great detail naked option selling adjustments (too risk for us to advise to the average retail investor) or basic credit spreads (because there reallly are not magic adjustments, if the market is moving against you, you need to get out and that is what we advise). So my book is not necessarily appropriate for the person looking to take Greek adjustments to the next level past Natenberg. That is what Cottle does. I think reading gets you so far, after that you need to model volatility trades (calendars, straddles, etc..) and see how they are affected by changes in vols to really take your understanding of trading volatility to the next level. Hull's book is what we used in school, it is not to help you with practical trading applications. Hull is better suited to people who design pricing models or need the mathematics to undergo complex calculations. Usually the nerds in research lol.. Not for the average trader though.
"the option trader handbook - strategies and trade adjustments" by Jabbour and Budwick (wiley publishing) daddy's boy