A friend of mine in the trading industry suggested I read this gem of a book ... within a single weekend I did just that ... and what a gem it is!Jeff Augen has put together a fine body of work in this book within which there are some seriously valuable nuggets of information.
The volatility spike graphs are a novelty in this business that anyone studying and trading volatility should benefit from.Essentially what he's uncovering is "differential volatility", in other words whether the volatility is being caused by buyers or sellers.
Typically, falling prices (due to selling action) will cause greater volatility, but not always.Sometimes the volatility is caused by rising prices.By understanding the direction in which the greater volatility of the underlying is occurring, the trader is able to position trades more appropriate to that skew.For example if the spikes indicate thatvolatility is caused by buying action then the calls may well be undervalued in advance of the next spike up.The trader can then make a double whammy trade, correct in direction and correctly in volatility.
Other nuggets include Jeff's slant on expiration date and earnings cycle trading, and the concept of stocks pinning to the strike, all of which are essential chapters in the book.
You'll be a more knowledgeable trader for reading this book and you should become a better trader for sure.
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