Review by CPA Australia

CPA Magazine

Book Shelf

By Derek Parker

After the global financial meltdown, derivatives have a bad name, but Chen, a CPA and financial planner, believes they should be seen as a crucial aspect of an investment portfolio. Her emphasis in on the practical, although she admits that the effective use of options involves a good understanding of the underpinning mathematics and theory.

Chen uses four hypothetical investors with different strategies to show how options can be used in conjunction with equity investments to enhance both safety and returns. Much of the risk associated with options trading, she believes, comes from trying to use them as a get-rich-quick vehicle, but for average investors a better strategy is to utilise them for long-term portfolio building and management.

Link to the September 2010 issue on IntheBlack is below

http://itb.newspaperdirect.com/epaper/viewer.aspx

Advertisements

Review by Australian Investors Association

Author: CHEN, Wai-Yee
Publisher: Oex Publishers Pty Ltd
ISBN: 9780 9807 15101
Location: Australia
Price: $27.95
Reviewed by: Mark Boulton

Have you ever considered investigating or finding out more about financial options? If so, this book could be a good starting point. If you have an existing financial strategy using options, this book may assist in adding some more strategies to your repertoire. Alternatively this can be a good book to alert you to what is available, and you could find an adviser to deal with the details (hint – the author would likely be a great adviser). By the way this book focuses mostly on ASX listed share options/indices.

There are four general investment mentalities (through following four characters) covered in this book – risk averse, get rich quick, slow and steady, and businesslike. Hopefully one to suit every reader’s mindset.

Unless you are already very familiar with options, you could easily get stuck with trying to understand everything in this book in one read. However after quickly reading the book without trying to understand absolutely everything, what I found great was that there is a shopping list of strategies that could be considered for reducing risks, optimising the purchase or sale of shares, or for profiting from a particular view. Once you find a strategy you like, you can to some extent revise backwards to fully understand its basis, and then work forwards to review the risks of the strategy (even including whether your thought process is logical or not). You are not going to need to remember every detail.

There is an associated website – (had a sneak preview – still under construction at time of writing this review) http://www.optionswise.com.au. This has some applications that look like they will be very helpful (maybe nearly mandatory) in assisting you with pricing options and how much cash-margin you will need to put down (even for multiple transactions). One very neat application is the “strategy optimizer” that recommends a strategy based on completing some questions and selection criteria. Be aware that you will most likely not understand these online applications if you have not been familiarised with options.

One minor criticism of this book, is that I was looking for more of a bridge from buying and selling shares, through to using options. I would have loved to see a chapter or section dedicated to detailed considerations regarding buying a share versus buying a call option, and selling a share versus buying a put. This is definitely covered – but I would have liked this basic information placed under the microscope a lot more.

This is a very commendable and helpful book, and one that I will certainly refer to from time to time. The author is convincingly very knowledgeable on the topic, and is generous with her experience. This book would certainly give most investors and speculators some more options to consider (boom boom J).

Mark Boulton is a member of the AIA.

Review by Your Trading Edge Magazine

YTE provides a roundup of the latest book titles to hit the shelves.

Optionswise: how to invest sensibly
Wai-Yee Chen (208 pages, Oex Publishers Pty Ltd, ISBN 978-0-98071-510-1
)

This is a great book about options trading because it provides a realistic insight into the use of options by investors and traders.

The first few chapters detail the essential knowledge required for those considering the use of options for either hedging or investment strategies. Whilst would-be options traders are often drawn into the market in the hope of making a ‘quick buck’ and/or using dubious option strategies to make unrealistic profits, Chen makes the well-founded observation that it is vitally important to understand how the options market works, the terminology, the mechanics, and who the other players are, before jumping in headfirst. 

These chapters should also be read by those who are already using various option strategies, but who have little knowledge of how the options market works. Chen explains how options can be used in various ways to construct share portfolios, to protect share portfolios, and as trading instruments in their own right.

Through out the book, Chen uses four ‘investors’ at various stages of their personal lives and investing journey. Appropriate strategies for particular shares and share portfolios are suggested, according to the objectives, views and circumstances of each ‘investor’.  This format provides practical application of the theories and strategies discussed and will help everyday investors understand which options strategies are suitable for various situations.

The other standout information about this book concerns the excellent and realistic ways Chen provides to handle the occasions when it all ‘goes wrong’. The book does not focus only on examples of when decisions turn out perfectly, but provides practical information on how options strategies can and do go wrong and what to do about it. Perhaps more importantly, Chen discusses, both from a psychological and from a financial standpoint, how to avoid getting into such situations in the first place.

‘OptionsWise’ is a great book about the realistic application of options strategies for shares investors everywhere. I would rate it as one of the most practical books I have read on the use of option strategies by and for share investors.

Why options can often be a better option for some

By Louise Goodwin

31 March 2010

Smart investing doesn’t have to involve big spending and  risks, says Wai-Yee Chen.

Chen – head of Asian Derivatives Desk at RBS Morgans, Sky Business reporter, author of OptionsWise how to invest sensibly and mother of three – says investing should be considered a lifestyle choice.

“People think investing is about being exposed to the ups-and-downs, which can be the case when you buy direct shares,”Chen of Wahroonga says in her book.

“But it can also be a consistent, stable part of life if you take a sensible approach to money management.”

The rest of the article can be found at this link http://www.optionswise.com.au/articles/NorthShoreTimes31Mar2010.pdf