by Daniel Holman
Greg Jensen’s book, Spread Trading: An Introduction to Trading Options in Nine Simple Steps, is a great help for anyone looking to understand the options market and the value of spread trading. His book is written for traders with any type of trading experience; both beginners and experienced traders stand to benefit a great deal from Jensen’s presentation of trading options. For those with no trading experience, Jensen presents trading in a way that is easy to understand, yet not overly simplistic and dumbed-down. Traders who have never quite made it into the options market because it is scary or too difficult to understand, or any of a myriad of reasons, Jensen presents the options market and the way it functions in an understandable way. He does a great job of teaching how the options market is beneficial for all involved in the transaction. For experienced options traders, Jensen offers a great new perspective on options through his own years of experience, and fresh perspective and deep understanding of the world of options.
What makes Spread Trading stand out so much from other books on options is the manner in which it is written. Jensen talks about remembering what it was like to know nothing about the market, so writes in a manner that anyone can understand. He does this in two ways, the first of which is his use of language, word choice. He uses language that all can understand, avoiding terms and references known only to the experienced trader (he goes so far as to explain what a stock is). Remembering what it was like to know nothing about investing or trading, he gives new traders a means to learn about it. The second thing is the way he presents the information. He uses a story of two men seeking to control their own retirement portfolios to illustrate the process of analysis and education that awaits those looking to enter into the arena of trading.
The story resembles that of many people entering the world of trading as it becomes more popular amongst average men and woman, people who want to retire and still have all their needs met, but do not want to be dependent upon some money manager to do it for them. There are two men, Lon and Shorty, who have a limited understanding about the market but find a mutual interest in similar stocks and companies. They have discussions with each other about different options they have in order to increase their profitability and limit their risk based on their individual analyses of the stocks. As a result, they develop their own trading forum amongst themselves, creating their own rudimentary “options exchange market.” They buy and sell options from each other, developing their own rules and guidelines. This development process is how Jensen teaches the reader about the way the stock and options markets work.
Keep an eye out for the coming interview with author Greg Jensen as he talks about what lead to the book and how to best utilize it…