personal finance

A few years back, Bittman wrote a well-received fundamental look at equity options entitled Options for the Stock Investor. This time around the author delves into the world of index options.

Trading Index Options covers a lot of material and shines at helping the trader build a foundation to expand upon. This strength is clearly evident early on when Bittman defines most common option strategies. From the simple to the complex, each page has a graph illustrating profit and loss characteristics at expiration along with some insightful comments on each strategy. To the author's credit he mentions transaction costs as a major factor hindering more complicated strategies.

In ensuing chapters Bittman covers basic buys and sells in detail, along with basic spreads, straddles, strangles, and ratio spreads. The book is light on math and seeks to make these strategies and the reasons for their employ easily understandable.

Included with Trading Index Options is a software program entitled Op-Eval 3. The program can be used to calculate implied volatilities, greeks, compare options, and graph positions. Perhaps of greatest utility, however, is the software's ability to allow you to look at how changes in underlying prices and time decay will affect your position.

While advanced option players may find they've already compiled much of the information Bittman presents, it remains a solid sourcebook. Beginners and intermediate players will be hard pressed to find a clearer or more concise reference tool. Easily worth the money you'll pay online and a nice addition to anyone's option library.

I found the software extremely helpful and working properly. The book, while discussing indexes, speaks to all equity and index options. I made the costly mistake of paying for the Windows version of Option Master Software through the z-shops and could kick myself daily for that error.

The software that comes with the book is basic Black & Sholes calculations but unlike Option Master, it offers comparative capabilities and graphing and costs 60%-80% less depending on whether you're a windows or mac user

While the text is basic, it is encyclopedic compared with the Option Master's redundant and pitiful effort. Unfortunately, Bittman's book should come with some technical support or a supporting website. But all in all, this is a pretty good primer.

The good news is that this book is very nicely done, providing a useful foundation to beginner and intermediate options traders. I found that I learned quite a lot about the interactions between option pricing and the various factors influencing pricing. The author provides numerous case study examples utilizing the OP-EVAL(TM) software included with the book. A majority of the book contains detailed examples describing how to use the software and interpret the output. The bad news is that the software will not run on current Windows operating systems (Windows 98 or newer). So don't buy the book if you want to try the software on your own. Efforts to contact the author, through the publisher McGraw-Hill, about the possibility of updating the software, have been unsuccessful. Otherwise a good book.