Also by William R. Gallacher

294 Pages·1980·5.15 MB·English

Also by William R. Gallacher
Winner Take All
THE
OPTIONS
EDGE
McGraw-Hill
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Library of Congress Cataloging-in-Publication Data
Gallacher, William R.
The options edge : winning the volatility game with options on
futures I William R. Gallacher.
p. cm.
ISBN 0-07-038296-4
1. Commodity options. I. Title.
HG6046.G278 1998
332.63'28--&2 1 98-1 1804
CIP
iz
Irwin/McGraw -Hill
A Division of% McGrmHillC ompanies
Copyright O 1999 by The McGraw-Hill Companies, Inc. All rights
reserved. Printed in the United States of America. Except as permitted
under the United States Copyright Act of 1976, no part of this publi-
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or stored in a data base or retrieval system, without the prior written
permission of the publisher.
ISBN 0-07-038296-4
The sponsoring editor for this book was Stephen Isaacs, the editing
supenisor was John M. Morriss, and the production supervisor was
Suzanne W B. Rapcavage. It was set by The Publishing Services
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What can be done with fewer
is done in vain with more.
-William of Ockham

CONTENTS
Preface
1 ROADS LESS TRAVELED
2 FAST FORWARD
3 OCKHAM'S EQUATION
4 THE WORD OF GOD
5 THE EMPEROR OF CHINA'S NOSE
6 PHANTOM OF THE OPTION
7 THE PROMISED LAND
8 BORN AGAIN
9 THE ARMCHAIR BOOKMAKER
REFERENCE
10 VOLATILITY PROFILES
Index

PREFACE
The Options Edge will most likely appeal to readers with some
practical experience in the trading of options. It has been writ-
ten, however, to be accessible to inexperienced traders who have
a strong desire to understand the workings of the options market.
Compared with other technical books on the subject, The
Options Edge is rather sparing in the use of algebra and complex
statistical formulae. However, the book does delve deeply into
the principles of statistical inference. It also analyzes a great deal
of data, but data structured in a way that anyone with an affinity
for numbers should find easily digestible. The author takes it
for granted that anyone interested in options is interested in
numbers.
Whereas much of what I have to say applies to options in gen-
eral, including stock options, the findings of The Options Edge
derive from, and are specifically relevant to, options on com-
modity futures. Before writing this book, I had to spend much
time and effort constructing a data base from which to draw con-
clusions. This data base is included in full at the end of the book
and may prove useful to other researchers who wish to check out,
statistically, for themselves, questions they may have about dif-
ferent option trading strategies.
I would like to thank my fellow trader, Stephen Clerk, for his
review of my manuscript in development, and Jurgens Bauer for
his hands-on lesson at the option pit of the New York Cotton
Exchange.
Bill Gallacher
SEPTEMBER, 1998

P A R T
O N E
OPTION
BASICS