OPTIONS, Gallacher & Ockham's Equation

Discussion in 'Options' started by Lobo, Dec 30, 2003.

  1. Lobo


    The Book:
    ....The Options Edge by Wm. Gallacher ....( copyright 1999 )

    "What can be done with fewer, is done in vain with more"......... William of Ockham

    Gallacher destroys "Black Scholes" in a masterful way, ( or so it seems to me )
    then continues on to present his "Ockham's Equation" and his ........
    " Keep it Simple - To Hell with Greeks" thinking !

    A Question for one(s) who are knowledgeable ( I am not ),
    ...If you use Gallacher's model....what is your impression ?

    Is there any currently available "Option Software" that is using this model ?

    For those of you who are not familiar with this,
    I'm SORRY - I would include the equation here - but don't know how to get in the math characters !
    If you are just dying to know ( ha ) - it's on page 54 of the book.

  2. I for one have never heard of the book. What is the gist of the model that is being discussed?
  3. ktm


    I use a modified version of Gallacher's formulas. I think he was right on with many of his conclusions. I believe I have improved upon some of his work to fit my personality and risk profile, and to compensate for the newer products available since the book was published.

    It is a very good book and worth the time for someone looking for a niche to start trading options in a meaningful way.
  4. Lobo;
    What's his model ;
    besides being an out of print book???

    Would it be a more accurate to say he shoots a few holes in;
    rather than destroys Black Scholes???

    Sound like you know enough to briefly explain it without an equation;
    ''What can be done with fewer''...-William of Ockham


    Love learning - Solomon trader king
  5. Lobo


    Guys I'll try to reply later....
    .....( not at all sure that I can make an intelligent reply however )
    Right now I have to run a long errand.

    ktm ...seems eminently more qualified than I - perhaps he will comment further ?

    Did not know it was out of print.
    The book is still available from my favorite Bookstore:

  6. ertrader1

    ertrader1 Guest

    First off, Gallarcher's theory does not destroy Scholes model.
    PLenty of reading on the comparisons at the UofC michicagan Ave Library, the GSB library. You can access it online, you can pay an non-alumni fee, not sure what it is.

    Second, to say to disguard the Greeks is interesting, as is Gallarchers Theory.

    Try pricing an option on Gallarcher's theory, with out using the Delta of the option, without using the Gamma of the underlyer as applied to the Change in Delta and with out Theta in time decay.

    keeping it simple is good if ur strag. is simple. (buy a IBM 1/35c with the Underlyer in an up trend an trading at 33 or so , now thats simple) But hedging, or spreading keeping it simple......not so sure if thats a smart thing.

    and even with the the IBM 1/35c you want to know the delta and have an idea of the true value.

    Of course I pay attention to the Greeks. I have yet to use any play based on Gallarcher's ideas. They could work, but i just dont understand throwing the greeks aside, sounds like shooting in the dark to me, regardless of what Gallarcher's theory says. And yes, they still teach Scholes model at UofC.
  7. This forum/posts are a good read;
    & believe it or not
    the Option Industry Council [OIC] bookstore misprices some of thier books sometimes to the low side also.:cool:

    January can be an wild , interesting month;
    only month i read William J. O. Neill takes a vacation.
  8. abogdan


    I've tried this formula. It works best in slow moving or slightly swinging markets. Works great with GE.
  9. I thought the best part of the book was the creation of true ATM straddle value disregarding the exchange set strike prices. You can use the formula and run it against stocks and have an idea of how straddle buywrites would have performed historicaly.
    #10     Dec 30, 2003