ISSUE 4

Whenever one sees a book in its fourth edition and learns that it is the bestselling title of all times for the topic it covers, it seems a reasonable assumption that it has something valuable to offer anyone interested in the topic it covers. Such is the case with Lawrence McMillan’s classic on options strategies.

Up front, this reviewer must confess that he is an unabashed fan of McMillan’s writings. When McMillan began publishing an options newsletter in 1972, the undersigned was a charter subscriber and still is, to this day, a weekly reader of it. In fact, this reviewer considers it one of the best sources of options information and recommendations available anywhere.

It is admittedly hard to give any sort of a detailed review of such a monumental work in the limited space available here. Therefore, a general overview and comments are in order. In short, Options as a Strategic Investment is the most comprehensive options reference manual available. There is no aspect of options trading or strategies that it does not cover in copious detail.

Although the material is admittedly “dry”, it is well written and clearly explained. At 1,000 pages, it is the equivalent of a college course in options. Not a quick read, it should be considered an indispensable and valuable resource for anyone seriously interested in gaining a thorough knowledge of options…and well worth the considerable time that should be devoted to such a daunting task.

Newcomers to options would be well advised to begin with more elementary books on the subject before tackling McMillan’s work. Indeed, in the preface, he states that, in writing the book, he assumes the reader already has a working knowledge of the basics of options, as well as peripheral subjects such as technical analysis.

Although the book does cover the basics, little room is devoted to them, and the reader is quickly immersed in detailed discussions of what would seem like esoteric subjects to the uninformed, such as naked writing, arbitrage, butterflies, ratio spreads, and the like.

It is my opinion that McMillan leaves no stone unturned when it comes to a thorough analysis of every aspect of options trading and strategies. While entire books are devoted to some of the strategies he covers in a single chapter (such as covered call writing), it would be hard to find a more professional or adequate explanation of the concept.

Some topics not covered in earlier editions are now also included, such as LEAPS, futures options, index spreading, index hedging strategies, and the like. A major section covers volatility and volatility trading techniques, among the most important and overlooked areas of options. Tax considerations, advanced concepts and the best strategies are covered in the final section. A separate study guide is available that will test your knowledge of the concepts and help to clarify each topic.

In short, if you have only a passing interest in options and just want to learn the basics, start…and stop…elsewhere. If you want to master the subject, start elsewhere to get the equivalent of your high school diploma…then, come here for your university level education.