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Volatility Trading, + website
In Volatility Trading , Sinclair offers you a quantitative model for measuring volatility in order to gain an edge in your everyday option trading endeavors. With an accessible, straightforward approach. He guides traders through the basics of option pricing, volatility measurement, hedging, money management, and trade evaluation. In addition, Sinclair explains the often-overlooked psychological aspects of trading, revealing both how behavioral psychology can create market conditions traders can take advantage of-and how it can lead them astray. Psychological biases, he asserts, are probably the drivers behind most sources of edge available to a volatility trader.
Your goal, Sinclair explains, must be clearly defined and easily expressed-if you cannot explain it in one sentence, you probably aren't completely clear about what it is. The same applies to your statistical edge. If you do not know exactly what your edge is, you shouldn't trade. He shows how, in addition to the numerical evaluation of a potential trade, you should be able to identify and evaluate the reason why implied volatility is priced where it is, that is, why an edge exists. This means it is also necessary to be on top of recent news stories, sector trends, and behavioral psychology. Finally, Sinclair underscores why trades need to be sized correctly, which means that each trade is evaluated according to its projected return and risk in the overall context of your goals.
As the author concludes, while we also need to pay attention to seemingly mundane things like having good execution software, a comfortable office, and getting enough sleep, it is knowledge that is the ultimate source of edge. So, all else being equal, the trader with the greater knowledge will be the more successful. This book, and its companion CD-ROM, will provide that knowledge. The CD-ROM includes spreadsheets designed to help you forecast volatility and evaluate trades together with simulation engines.
Your goal, Sinclair explains, must be clearly defined and easily expressed-if you cannot explain it in one sentence, you probably aren't completely clear about what it is. The same applies to your statistical edge. If you do not know exactly what your edge is, you shouldn't trade. He shows how, in addition to the numerical evaluation of a potential trade, you should be able to identify and evaluate the reason why implied volatility is priced where it is, that is, why an edge exists. This means it is also necessary to be on top of recent news stories, sector trends, and behavioral psychology. Finally, Sinclair underscores why trades need to be sized correctly, which means that each trade is evaluated according to its projected return and risk in the overall context of your goals.
As the author concludes, while we also need to pay attention to seemingly mundane things like having good execution software, a comfortable office, and getting enough sleep, it is knowledge that is the ultimate source of edge. So, all else being equal, the trader with the greater knowledge will be the more successful. This book, and its companion CD-ROM, will provide that knowledge. The CD-ROM includes spreadsheets designed to help you forecast volatility and evaluate trades together with simulation engines.
224 pages, Hardcover
First published January 1, 2008
64 people are currently reading
625 people want to read
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Displaying 1 - 17 of 17 reviews
June 2, 2015
I would give this three stars except I couldn't recommend this to anyone who isn't sure they want to read it; I can only think of one friend I have for which this would be appropriate. If you couldn't guess from the title, it's about trading volatility, primarily using options. The author is a PhD in theoretical physics and it shows. The writing is very much academic paper style and the whole thing reads like a math textbook (including plenty of calculus and partial differential equations). In addition, there are typos littered throughout the book (including the formulas) so even if you wanted to use them you'd have to be careful. I believe there's online errata set up for the book, but I'm a little surprised this didn't get more careful proofing.
Now that you've been warned, I will say that the author seems to really know what he's talking about, and most of the advice is practical if you are the sort of person that wants to do what the author does (I'm not). It's not introductory, though, and there are a lot of terms you'll have to learn somewhere else to make sense of author's spare text. I do have to give him credit for discussing the Dunning-Kruger effect, though. That's something that needs to be addressed in many professional contexts where people who don't know what they are doing can also participate.
Now that you've been warned, I will say that the author seems to really know what he's talking about, and most of the advice is practical if you are the sort of person that wants to do what the author does (I'm not). It's not introductory, though, and there are a lot of terms you'll have to learn somewhere else to make sense of author's spare text. I do have to give him credit for discussing the Dunning-Kruger effect, though. That's something that needs to be addressed in many professional contexts where people who don't know what they are doing can also participate.
May 22, 2017
Volatility trading explored in depth ...
The author is a physicist who is a trader by both have avocation and vocation. His analysis of all aspects of volatility is beautifully done and described. Yes, there is mathematics involved, but it is mostly from a practical, trader's perspective and not from a theoretical financial engineers perspective. Even if the math is too much for you, the text summarizes the key points and implications in words and with trading examples from the authors own experience.
I am in intermediate trader with a scientific background. I will be going back to this text as my experience grows, to absorb the finer points presented here. It is not an easy read but a definitely worthwhile one.
In addition, The last chapter is a summary of books, articles, and websites the author has found useful. I wish more authors of trading texts would do this for their readers: a very valuable feature.
Anyone trading volatility or wishing to learn about volatility should have this book on their shelf and read.
The author is a physicist who is a trader by both have avocation and vocation. His analysis of all aspects of volatility is beautifully done and described. Yes, there is mathematics involved, but it is mostly from a practical, trader's perspective and not from a theoretical financial engineers perspective. Even if the math is too much for you, the text summarizes the key points and implications in words and with trading examples from the authors own experience.
I am in intermediate trader with a scientific background. I will be going back to this text as my experience grows, to absorb the finer points presented here. It is not an easy read but a definitely worthwhile one.
In addition, The last chapter is a summary of books, articles, and websites the author has found useful. I wish more authors of trading texts would do this for their readers: a very valuable feature.
Anyone trading volatility or wishing to learn about volatility should have this book on their shelf and read.
December 12, 2021
A wonderful mix of philosophy, theory, and practicality – Sinclair's textbook is a must-read for anyone embarking on a career related to volatility.
Philosophy: modelling entails transformation to a slower-moving (i.e more understandable) parameter space
Theory: the technicals of removing bias from rolling (overlapping) windows when calculating volatility
Practicality: hard to choose just one here. Liked the chapters on bet sizing (particularly the effects of parameter misestimation on Kelly betting), the explainers of VIX/ETNs, etc. But the "Life Cycle of a Trade" is gold – very hard to get that kind of insight outside of an actual desk!
Philosophy: modelling entails transformation to a slower-moving (i.e more understandable) parameter space
Theory: the technicals of removing bias from rolling (overlapping) windows when calculating volatility
Practicality: hard to choose just one here. Liked the chapters on bet sizing (particularly the effects of parameter misestimation on Kelly betting), the explainers of VIX/ETNs, etc. But the "Life Cycle of a Trade" is gold – very hard to get that kind of insight outside of an actual desk!
November 15, 2008
Without a doubt the best book on practical options trading methodologies I've ever read. Necessitates some degree of mathematical background, primarily statistics, but very light on the math compared with most options trading books.
Read
April 10, 2021Comprehensive. Highly technical but summary at the end of each chapter is quite good.
March 6, 2023
One of the best books on the subject out there. Really takes you through the process of finding an edge in the volatility space and shows you how to profitably trade it. Sinclair is a master of his trade and takes a no-nonsense approach to things. Yes, it's all about making money, but focus on the right process and the results will follow.
Yes, you need a good background in math to gain the most out of this book. As someone with a Master in economics, I was able to follow most of the derivations, though sometimes I also had difficulties understanding everything. I would say that you shouldn't attempt to read this unless you have read Hull before, no matter what your background is. Don't read this book if you just started with options. You need to know BMS, elementary stochastic calculus, and trading practices for this book.
It's true, the book reads like a journal article. However, this is meant in the best way: it's concise, accurate, and with a clever sense of humour when needed. I love Sinclair's writing style. Though, there are typos in the text and equations throughout the book. Nothing that is too damaging to the flow of the text.
I read his Positional Option Trading before this, and I still gained a lot from reading this book. Yes, there are overlapping chapters, mostly the non-mathematical parts, but I would still recommend it to those who read his other stuff.
The list of resources at the end is a gem. I will surely read some of the books listed there.
Yes, you need a good background in math to gain the most out of this book. As someone with a Master in economics, I was able to follow most of the derivations, though sometimes I also had difficulties understanding everything. I would say that you shouldn't attempt to read this unless you have read Hull before, no matter what your background is. Don't read this book if you just started with options. You need to know BMS, elementary stochastic calculus, and trading practices for this book.
It's true, the book reads like a journal article. However, this is meant in the best way: it's concise, accurate, and with a clever sense of humour when needed. I love Sinclair's writing style. Though, there are typos in the text and equations throughout the book. Nothing that is too damaging to the flow of the text.
I read his Positional Option Trading before this, and I still gained a lot from reading this book. Yes, there are overlapping chapters, mostly the non-mathematical parts, but I would still recommend it to those who read his other stuff.
The list of resources at the end is a gem. I will surely read some of the books listed there.
April 10, 2025
Sinclair’s Volatility Trading is one of the most complete, accessible, and insightful books on options and volatility I’ve read. It’s goes beyond vol trading and serves as a roadmap for thinking probabilistically, managing risk, and designing trades.
At its core, this book is about transforming noisy markets and options prices into slow-moving, measurable parameters that can be forecasted and acted on. Sinclair demystifies the mechanics of options pricing, volatility modeling, and hedging, all while grounding the reader in a practical trading mindset.
The book blends the empirical exploration of Maymin's Financial Hacking with the philosophical clarity and wisdom about markets that characterizes Lebron's The Laws of Trading. The writing is precise and fun to read.
Some of my favorite moments:
1. The discussion on discrete hedging is great. He shows how traders can lose money on options even when they correctly forecast realize volatility, illustrating how and why P&L is path dependent.
2. The section on money management and position sizing was intuitive and helpful. Ex: If you have a trade because you think something is worth $100 and its at $90, perhaps originally you want it to fall to $85 so you can add more. You may keep adding on the way down, but eventually, maybe when it hits $70 you should start to decrease your position out of risk management concerns.
3. Sinclair emphasizes forecasting volatility distributions rather than point-estimates which, I think, is great advice
4. The Life Cycle of a Trade was also great. It is rare to find real world examples of successful volatility trades and it was helpful to understand his process further.
Overall this was a very great introduction to volatility trading and option dynamics. I look forward to reading his other books.
At its core, this book is about transforming noisy markets and options prices into slow-moving, measurable parameters that can be forecasted and acted on. Sinclair demystifies the mechanics of options pricing, volatility modeling, and hedging, all while grounding the reader in a practical trading mindset.
The book blends the empirical exploration of Maymin's Financial Hacking with the philosophical clarity and wisdom about markets that characterizes Lebron's The Laws of Trading. The writing is precise and fun to read.
Some of my favorite moments:
1. The discussion on discrete hedging is great. He shows how traders can lose money on options even when they correctly forecast realize volatility, illustrating how and why P&L is path dependent.
2. The section on money management and position sizing was intuitive and helpful. Ex: If you have a trade because you think something is worth $100 and its at $90, perhaps originally you want it to fall to $85 so you can add more. You may keep adding on the way down, but eventually, maybe when it hits $70 you should start to decrease your position out of risk management concerns.
3. Sinclair emphasizes forecasting volatility distributions rather than point-estimates which, I think, is great advice
4. The Life Cycle of a Trade was also great. It is rare to find real world examples of successful volatility trades and it was helpful to understand his process further.
Overall this was a very great introduction to volatility trading and option dynamics. I look forward to reading his other books.
March 12, 2021
This book needs a warning label. I as someone holding an engineering degree found a significant portion of the math presented quite a bit beyond me. I was able to follow the descriptions of the Greek filled differential equations enough to follow the subject matter, but I would be unable to use the equations in a real life setting. To fully understand everything in this book a graduate degree in mathematics is probably required. That being said this book had meaningful insights, as long as you are determined enough to get through the pages and pages of equations in order to find them.
April 16, 2021
Good for learning about trading Vix options
December 30, 2021
A bit more math heavy than his other books, but not in a bad way. A must-read if you want to get into volatility trading.
August 19, 2013
I imagine this book is just right for want-to-be quants but for the average independent retail investor it's a little head strong. The introduction is beautifully written and promises little to do with math, but so goes the promise. The book is filled with deep math that takes a study in itself. I would move my attention (and did) over to Timing Volatility: Measure Fear and Greed to Get an Edge in the Market
By: Steven Place who keeps his promise to stay clear and simple keeping the reader engaged and educated with out the need for pretense. My favorite line in Timing Volatility so far has been "You can measure IV through a series of mathematical steps that
are best left to trading platforms and undergraduate students. What is important to understand is that each market has a unique IV, each stock has a unique IV, and each option has a unique IV. " - that's it. It's not followed by 10 pages of cryptic formulas that prove the author is smarter than you. Euan Sinclair, I imagine is in a league all his own but his book will never be on the retail investor's shelves.
By: Steven Place who keeps his promise to stay clear and simple keeping the reader engaged and educated with out the need for pretense. My favorite line in Timing Volatility so far has been "You can measure IV through a series of mathematical steps that
are best left to trading platforms and undergraduate students. What is important to understand is that each market has a unique IV, each stock has a unique IV, and each option has a unique IV. " - that's it. It's not followed by 10 pages of cryptic formulas that prove the author is smarter than you. Euan Sinclair, I imagine is in a league all his own but his book will never be on the retail investor's shelves.
July 14, 2013
This is a tiny hardback book with an orange cover and recycled (!) pages, and even though it has this unassuming feel, it is a book from 2008 which is very fresh for a quant book.
This book covers volatility from the perspective of the current theories and models. It is very thorough and comes with lots of example, some of which are included as Excel spreadsheets on the accompanying CD.
I would recommend this book to anyone involved in vol arb or options generally. It's a good read and I haven't found any significant fault with the book (unlike half-meaningless books such as Dynamic Hedging: Managing Vanilla and Exotic Options). Highly recommended!
This book covers volatility from the perspective of the current theories and models. It is very thorough and comes with lots of example, some of which are included as Excel spreadsheets on the accompanying CD.
I would recommend this book to anyone involved in vol arb or options generally. It's a good read and I haven't found any significant fault with the book (unlike half-meaningless books such as Dynamic Hedging: Managing Vanilla and Exotic Options). Highly recommended!
June 2, 2016
This is an atypical book on trading. It is more suitable for numerate readers or those with a basic mastery of volatility calculations and modeling and have had some experience trading options.
Also, the blurb for this book is highly misleading. If anything, the author dissed the much recycled mantras found in many self-help trading books about trading psychology. Successful trading is first and foremost about finding an edge and exploiting it.
Also, the blurb for this book is highly misleading. If anything, the author dissed the much recycled mantras found in many self-help trading books about trading psychology. Successful trading is first and foremost about finding an edge and exploiting it.
June 7, 2013
Highly approachable.
September 11, 2013
Much improved over the first edition.
August 22, 2017
Prob the best book on volatility; but I think this is pretty good at principles of real money too. This book will only make you a more superior investor./
Displaying 1 - 17 of 17 reviews