As options trading has become increasingly popular, the number of books on options has proliferated. Ron Ianieri’s Options Theory and Trading: A Step-by-Step Guide to Control Risk and Generate Profits (Wiley, 2009) will undoubtedly become a standard against which introductory texts are measured. Beginning with options basics and theory (pricing models, the Greeks, and synthetics), Ianieri moves on to strategies. He is writing for the novice; for instance, more than halfway through the book he reminds the reader that “bullish” means to have a positive outlook on a stock’s future movement. But even more seasoned traders can profit here and there from this book. It also has a place in the trader’s library as a reference book that can offer a quick refresher course as needed.
Ianieri is to be praised for spending thirty pages on synthetic positions. Although there no shortage of literature on synthetics, much of it falls into one of two camps—too abbreviated or hopelessly convoluted. In his discussion of synthetics, as throughout the book, Ianieri in effect targets the “C” student, the one who needs to have things clearly explained in multiple ways (the general, the specific, charts, figures, and tables) and who benefits from repetition and highlighting. Since in the world of options the novice is at best a “C” student, his educational strategy is spot on. Even the “A” student can profit because Ianieri doesn’t oversimplify; the “A” student can just read a little more quickly.
Ianieri covers the following strategies: covered call/buy-write, covered put/sell-write, protective put, synthetic put/protective call, collar, vertical spread, time spread, diagonal spread, straddle, strangle, butterfly, and condor. In each basic strategy (covered calls through collars) he lays out the foundation of the strategy, its performance in different scenarios, the lean (bias), gives examples and finally a synopsis. Where appropriate he also discusses rolling the position. His discussions of advanced and combination strategies break out of this structural mold, but they are still lucid and methodical.
Options Theory and Trading is not just a book about options, it’s a course on options. Ianieri is not only a writer but a teacher. The reader who doesn’t understand options by the time he finishes this book should look for a new instrument to trade.