Microsoft Excel for Stock and Option Traders:
Build Your Own Analytical Tools for Higher Returns
By Jeff Augen
Pearson Education, publishing as FT Press
$49.99, 195 pages
In “Microsoft Excel for Stock and Option Traders”, Jeff Augen, author of the Volatility Edge in Options Trading, aims to help technically minded private investors learn to run just a little faster than the market. Most complex statistical analysis and model building is now within reach of any investor who has access to a trading platform and a copy of Microsoft Excel. The book is designed to help investors translate complex questions into simple spreadsheet models.
My initial impression of this book was that it would benefit the more sophisticated investor familiar and comfortable with Excel spreadsheets and databases. The book was not for the trader who lacks advanced arithmetical skills or who is not already well-versed in the art of spreadsheets or databases.
But Augen does a good job of demystifying key analytical concepts and teaches all the Excel skills an investor needs. Using realistic examples, Augen explains everything from simple conditionals and expressions to sophisticated Visual Basic macro programming.
A private investor and writer, Augen has spent more than 10 years building an intellectual property portfolio of databases, algorithms and associated software for technical analysis of derivative prices.
Augen says that investors who limit themselves to traditional off-the-shelf indicators always will lose money to sophisticated traders armed with more powerful tools. Times have changed. Today’s clever investors tend to focus their attention on analyzing subtle distortions in volatility and identifying anomalies in derivate prices.
Technological advances make it very difficult for the investing public to compete in short-term trading. In this book individual investors should find enough practical guidance to close the technology knowledge gap.
Augen’s book aims to give the trader an edge over those who perform more traditional means of trading and technical analysis. Yet it is not a book on technical charting. “Our goal will be to develop skills and tools that can continue to reveal new trading opportunities without regard to changes in market behavior or the world economy,” the author says.
The book, in essence, encourages the private investor to use Excel 2007/2010 to improve systematically how he or she analyzes trades; to uncover market distortions in time to profit from them; and identify new correlations the market has overlooked.
The book succinctly explores the relationship between spreadsheets and databases. Calculations that are complex to program in a database often can be accomplished with a single introduction in a spreadsheet. Spreadsheets can solve many complex problems without any programming.
Conversely, databases can grow much larger than spreadsheets. They also can integrate disparate information sources, including spreadsheets, other databases, and Web pages, into single data infrastructure.
The book is peppered with tables to illustrate how spreadsheets neatly detail the various relevant statistics of a particular stock denoted by its stock symbol. There are many charts that exemplify Excel’s data visualization functionality.
Patrick Kelly is a freelance writer with a background in commodity market reporting.