From the November 01, 2009 issue of Futures Magazine • Subscribe!

Commodity options: Trading and hedging volatility in the world's most lucrative market

Commodity Options: Trading and Hedging Volatility in the World’s Most Lucrative Market
By Carley Garner and Paul Brittain
Pearson Education, Inc., FT Press
$39.99, 260 pages

The trading world is full of complex approaches to making money, but none surpasses commodity options trading in its complexity and risk-reward ratio. Betting on the future is what all traders do, but commodity options traders do so with hedging possibilities that make it an attractive approach. In their book, Carley Garner and Paul Brittain lucidly explore this trading approach. The book is well written, clear, and informative as to how one might employ specific commodity options trading strategies to make money.

Garner and Brittain logically and coherently move the reader from understanding commodity options trading to understanding how to employ the options strategies presented in the book. The introduction includes a brief, historical explanation of how options trading has come to be what it is today. Two important points emerge in this explanation. The first is that trading “long” options only (the way it was in the 1980s) provides minimal profit, and trading options “short,” as well as long, vastly improves the possibility of making money trading options. The second is that the trading playing field is more level because commodity options trading, and trading in general, are more available to the public.

In a “crash course” in trading options, the authors define what an option is, how it works, and what the trader needs to understand to be successful. The book also presents several strategies for trading options other than the traditional buying of calls and puts.

Given that both Garner and Brittain have long, successful, records in the options world, one should pay close attention to the strategies presented, and there are many—long and short option strategies, credit-spread strategies, limited-risk spread strategies, synthetic, swing-spread strategies, ratio-spread strategies, and much more. The book focuses on identifying opportunities, gaining an edge, and debunking option trading myths.

Making money trading is a difficult proposition, and many traders don’t succeed, having to quit when their trading account runs out. Garner and Brittain’s book goes a long way to changing this reality, at least for those who take trading seriously enough to keep learning. Laying out a variety of strategies, explaining in detail and with sharp focus how to apply them, and doing so with a clarity that simplifies the complexity of trading options, the authors succeed in their mission to open the door to commodity option trading for the average investor/trader. The authors also explain how to manage risk in trading options, and that alone is worth the price of the book.

Brandon Jones is an entrepreneur, a writer, and an educator. Although not a trader by profession, he trades on a regular basis to maintain and improve his portfolio return.

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