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Editorial Review Product Description
Destined to become a classic of trading literature, this book demonstrated how perception of risk is the key element to successful options trading. In easy-to-understand, down-to-earth language, Cottle shows traders how to calculate the risk on any option position, from simple puts and calls to sophisticated straddles and butterflies instantly. Cottle explains how to eliminate inappropriate risks, adjust positions as they underlying market changes, and optimize the potential of the option positions. No other book so effectively merges option theory with actual market experience. ptions: Perception and Deception also includes: Dessecting options positions and quantifying the hierarchy of risk; Elimanating or reducing unproductive risk; Matching a strategy to your market outlook. ... Read more Customer Reviews (7) 
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I wanted to comment on my experience with the book and some of the other customer reviews.
You do not need to be a market maker or veteran options trader to read and get value from this book. I am a retail options trader, with a very serious full time job, and have virtually no mathematical aptitude, and I have already started benefiting greatly from the book.
In my opinion you should make sure you have basic familiarity with how options work, and some of the basic outright positions and spread techniques and what market view they support, and you will be ready to start learning what options are really about from there. You cannot go wrong by using this book and Mr. Cottle's other materials as the very next step.
Be under no delusion---after the basics---options can get very complicated very quickly--if you let them. I have discovered, contrary to my initial impression, that Mr. Cottle in fact through the use of detail is really attempting to simplify option strategy decisions and trading itself. Through the use of what seems to be complicated examples---CC cuts through the fog and gets to the meat of options strategies and how and why one might choose one over the other--and invariably the best choice is something straightforward.
Based on what I know about him and my experience with his materials, he is committed to teaching. If you expect to read this book without pen and paper in hand, with little or no effort on your part, and have him simply say "do x and you will get rich" this book and his approach is definitely not for you. He is like any good teacher. He will make you work for the answer, but not leave you hanging when you struggle. In working for the answer---and having his approach, experience and techniques available--you will most assuredly gain a grasp of options and how to make money trading them that you never had before.
Don't be intimidated when you first view the book. The presentation looks strange, the tools he uses will be different from those you have seen or used before, and the terminology will be strange to some. There is a reason he takes the approach he does and it will, with a modicum of effort, become clearer every time you are exposed to it and use it.
Here is what it has done for me.
It has forced me to actually think about what may be happening underneath the option quote and the day to day change in a position.
It has convinced me that trading outright positions whether short naked or long does not necessarily produce the best results. Yes longs are problematic due to all the standard theta reasons, and yes naked shorts are risky---we all know that---the trick is to figure out how to take the inherent advantages of either of these approaches, and make them work for your view of the market without getting killed in the process.
What he has made me a believer in is that risk can be reasonably controlled, while still making very attractive rates of return, and if you are looking for a method to make reasonable returns in the market, the raw tools are there for the taking.
He has convinced me that uncomplicated but well constructed spreads, for debit or credit, can actually allow me to participate in the market with a reasonable expectation of success, and allow me to sleep at night in the process without position adjusting every 10 minutes. He has also made me a true believer that options, by their very nature, provide huge flexibilities that outright underlying positions cannot, and allow much wider margins for error if I prove to be wrong in my view in any given position if they are structured correctly in the first place.
You do not have to be a rocket scientist to make money in options. In fact if you arbitrarily go out and sell an option this afternoon at random, odds are it will expire worthless and you will make money. The problem lies in the odds piece that is not in your favor. You also do not have to be a rocket scientist to get killed by these odds. Although small in most cases, when it goes against you---you will be dead unless you are very savvy and well prepared to deal with such an eventuality. This is the piece that CC is so good at getting at--managing the underlying risks in any given option situation, structuring the position correctly and buying or selling it right to hold as much risk as possible in check--while still giving you the opportunity to make some money.
The thing that finally made me a believer was the time he took to talk to me. He is not a prima donna. When I had concerns about spending even one more nickel on books, learning materials, educational seminars, etc. because so much of what I spent has been a waste of money and merely kept the educator in new Mercedes for so long---CC came through with flying colors. He took almost a half hour and spoke with me on the phone, and since then has never failed to answer a polite note or inquiry in his forum on his website Riskdoctor.com. He certainly is not getting rich from my buying the book or a seminar tape as his prices are very fair and honest. All these factors have convinced me that he must have the true teaching bug and his desire is to teach and help me improve.
He is not an easy taskmaster--and he is not going to tell you what to trade. He is a good teacher and like any good teacher he always tries to stay out in front of you a bit with his teaching and materials. This is a good thing for those willing to stretch just a little because the nuances start to emerge very quickly. The best part is he is there to get you untangled when you do get stuck in the weeds.
One more thing, after you read through the book once---go on his website and spend a little money and get one of his taped training sessions that he has actually done with live students [I started with Straddles and Strangles]. It will DEFINITELY help you clear some of the confusion that the book will inevitably create.
If you want to know more about options than any of these get rich books can ever tell you--buy the book---it will pay for itself many times over in your first couple trades, and the bonus is you will understand why it paid for itself, rather than your just having made a lucky guess or two.
DDK
Read it!
I wanted to comment on my experience with the book and some of the other customer reviews.
You do not need to be a market maker or veteran options trader to read and get value from this book. I am a retail options trader, with a very serious full time job, and have virtually no mathematical aptitude, and I have already started benefiting greatly from the book.
In my opinion you should make sure you have basic familiarity with how options work, and some of the basic outright positions and spread techniques and what market view they support, and you will be ready to start learning what options are really about from there. You cannot go wrong by using this book and Mr. Cottle's other materials as the very next step.
Be under no delusion---after the basics---options can get very complicated very quickly--if you let them. I have discovered, contrary to my initial impression, that Mr. Cottle in fact through the use of detail is really attempting to simplify option strategy decisions and trading itself. Through the use of what seems to be complicated examples---CC cuts through the fog and gets to the meat of options strategies and how and why one might choose one over the other--and invariably the best choice is something straightforward.
Based on what I know about him and my experience with his materials, he is committed to teaching. If you expect to read this book without pen and paper in hand, with little or no effort on your part, and have him simply say "do x and you will get rich" this book and his approach is definitely not for you. He is like any good teacher. He will make you work for the answer, but not leave you hanging when you struggle. In working for the answer---and having his approach, experience and techniques available--you will most assuredly gain a grasp of options and how to make money trading them that you never had before.
Don't be intimidated when you first view the book. The presentation looks strange, the tools he uses will be different from those you have seen or used before, and the terminology will be strange to some. There is a reason he takes the approach he does and it will, with a modicum of effort, become clearer every time you are exposed to it and use it.
Here is what it has done for me.
It has forced me to actually think about what may be happening underneath the option quote and the day to day change in a position.
It has convinced me that trading outright positions whether short naked or long does not necessarily produce the best results. Yes longs are problematic due to all the standard theta reasons, and yes naked shorts are risky---we all know that---the trick is to figure out how to take the inherent advantages of either of these approaches, and make them work for your view of the market without getting killed in the process.
What he has made me a believer in is that risk can be reasonably controlled, while still making very attractive rates of return, and if you are looking for a method to make reasonable returns in the market, the raw tools are there for the taking.
He has convinced me that uncomplicated but well constructed spreads, for debit or credit, can actually allow me to participate in the market with a reasonable expectation of success, and allow me to sleep at night in the process without position adjusting every 10 minutes. He has also made me a true believer that options, by their very nature, provide huge flexibilities that outright underlying positions cannot, and allow much wider margins for error if I prove to be wrong in my view in any given position if they are structured correctly in the first place.
You do not have to be a rocket scientist to make money in options. In fact if you arbitrarily go out and sell an option this afternoon at random, odds are it will expire worthless and you will make money. The problem lies in the odds piece that is not in your favor. You also do not have to be a rocket scientist to get killed by these odds. Although small in most cases, when it goes against you---you will be dead unless you are very savvy and well prepared to deal with such an eventuality. This is the piece that CC is so good at getting at--managing the underlying risks in any given option situation, structuring the position correctly and buying or selling it right to hold as much risk as possible in check--while still giving you the opportunity to make some money.
The thing that finally made me a believer was the time he took to talk to me. He is not a prima donna. When I had concerns about spending even one more nickel on books, learning materials, educational seminars, etc. because so much of what I spent has been a waste of money and merely kept the educator in new Mercedes for so long---CC came through with flying colors. He took almost a half hour and spoke with me on the phone, and since then has never failed to answer a polite note or inquiry in his forum on his website Riskdoctor.com. He certainly is not getting rich from my buying the book or a seminar tape as his prices are very fair and honest. All these factors have convinced me that he must have the true teaching bug and his desire is to teach and help me improve.
He is not an easy taskmaster--and he is not going to tell you what to trade. He is a good teacher and like any good teacher he always tries to stay out in front of you a bit with his teaching and materials. This is a good thing for those willing to stretch just a little because the nuances start to emerge very quickly. The best part is he is there to get you untangled when you do get stuck in the weeds.
One more thing, after you read through the book once---go on his website and spend a little money and get one of his taped training sessions that he has actually done with live students [I started with Straddles and Strangles]. It will DEFINITELY help you clear some of the confusion that the book will inevitably create.
If you want to know more about options than any of these get rich books can ever tell you--buy the book---it will pay for itself many times over in your first couple trades, and the bonus is you will understand why it paid for itself, rather than your just having made a lucky guess or two.
DDK
Updated Review by the Author
Reviewer: The author, Charles M. Cottle *** charles@RiskDoctor.com
Although this original text was written for professional market makers, it proved to be a valuable resource for sophisticated retail investors and hedgers.I therefore created a new book, "Coulda Woulda Shoulda" (available for free download at www.riskdoctor.com) which borrowed about 80% of the original text and added more tools for non-professionals including an email dialogue with a relative novice, spanning 2 months.Most of the strict market making tools have been removed but will be resurrected in book 3; "Taming Your Portfolio" due out later this year.
Best book for options traders.
There are basically two types of options books: mathematical
books on valuation that tend to be filled with solutions
for ever more exotic contracts, and books for traders that
go over the practical workings of positions in various
concrete scenarios. Cottle is definitely of the second type.
There's not really much math in it, unless you're intimidated
by three-dimensional graphs. What it does have is an incredible
wealth of insight, from experience, into the tricks and the exceptions--the rent-a-call, the dividend plays, contract
risk and post-expo deltas, complicated synthetics, the
interrelations between greeks. That said, what moved me to write a review was to take
exception with a previous reviewer's comment: "No lazy
editing or prose here". The prose is okay, but the editing
is worse than lazy--it's horrendous. Flipping my copy open
at random I come to p.151-152 on Break-Even analysis. Try
finding column 7 in exhibit 4-23, or the supposed arrow in
column 4. It's all a mess. That's an extreme case, but
throughout the text, it's hard enough trying to pick up
the bond options lingo (futures in 32nds but futures-options
in 64ths--all "ticks"; and the different multipliers for
indexes and futures), without having to deal with missing
words, inaccurate references, etc, etc. But ultimately, working
to figure it all out gets you to understand it all the better. With five years of floor trading as an equity options market
maker, and having read and reread and rereread... Natenberg,
Baird, Hull, Connolly, Cox Ross Rubinstein, Chriss, Taleb--and
others--I'd say Cottle is clearly the best book. That said,
however, I don't know how much use a non-professional--someone
who doesn't manage a large, actively traded book of options--
will get out of it. It should be intellectually rewarding if you
can figure it out. Maybe inspire you to go look for a minimum
wage clerking job in Chicago, NY, Philly, or SF to get abused
for a year or so and then maybe get a badge.
Options Innovator
I read Options: Perception and Deception at least 3-4 times before many of the advanced concepts began to sink in.This is not a book for an options novice; in fact, I would suggest that most people read Natenberg's book on options prior to engaging in this incredible text.While many of the advanced 3-D graphs were beyond my grasp, I particularly liked Cottle's description of "real world" options positions, how he executed them and how he managed them throughout their duration.Of particular interest to many readers should be the concept of "gamma scalping", and the section on wingspreads and adjusting positions.This text is so far beyond "mainstream" options books, that words do not describe how important this book will become.
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Book was in terrible condition