Taleb once again. Although you may require some knowledge on futures and option trading to understand the bottom of the story, it is nice book, light to read and usefull. If you trade on futures and options you should take a look inside, not becuase of the technical content but to have a close look at the man's ideas.

Before starting as a trader I had studied Hull in college and took some 'advanced' investments classes. On the first day of work I was told to read 'Dynamic Hedging'.
My impression: Hull teaches you the (very) basics and Taleb gives you insight in the concepts that are truly relevant. However, do not expect to read it and get everything he writes. As it is written from a practicioner's point of view, things will probably only become cristal clear when you re-read it after spending a considerable amount of time in the dealing room.

This isn't so much a review as an inquiry -

I'm still working through this book, but I've noticed that it is replete with algebraic errors. Taleb doesn't always go through every step of his calculations, so they're difficult to follow.

Does anyone else notice these errors or am I getting caught in the algebra? An example is on page 38 towards the top:

He says that 12,500,000/.985 is 1,269,000. Even with the rounding (shaving off the 355), I'd say he's off by a factor of 10. Shouldn't the answer by 12,690,000? To confirm this, in the next paragraph he writes that a 1 cent rise in the futures price will yield $125,000 in profits on the future (12,500,000*.01) or $126,900 on the forward hedge. Intuitively, it seems that to get $126,900, you could divide $125,000 by .985 or multiply 12,690,000 (the answer you should've previously arrived at) by .01.

There are other errors like this throughout the book - anyone else notice them?

Books-A_Million lists a revised edition, ISBN: 0471353477, with December, 2008, as a publication date. Their advance order price is $76.95.

Books-A_Million lists a revised edition, ISBN: 0471353477, with December, 2008, as a publication date. Their advance order price is $76.95 (10% less if you pay $15 for a "Millionaire's Club" membership).

Books-A_Million lists a revised edition, ISBN: 0471353477, with December, 2008, as a publication date. Their advance order price is $76.95.

Great book, very easy read as it is written in a conversational tone. Covers all the issues associated with derivative trading in an intuitive manner.

Definitely for pros. This book is one of the fewest which is concentrated on the hedging compared to the tons which explain pricing. The other pro of the book is you don't need to be a quant or a PhD guy to understand the book. If this seems what you are looking for, i recommend you get it.

This book is a really useful and practical introduction in derivatives from a guy who knows what he is talking about.
Plenty of illustrations and stories from real life. Mathematics is quite informal, and hence the book may not be used for PhD programs - it's a good master's level... good for a guy who wants to start trading options.

This book is a really useful and practical introduction in derivatives from a guy who knows what he is talking about.
Plenty of illustrations and stories from real life. Mathematics is quite informal, and hence the book may not be used for PhD programs - it's a good master's level... good for a guy who wants to start trading options.

VERY INFORMATIVE, WRITTEN BY AN ACTIVE TRADER, MANY USEFUL TIPS TO BE APPLIED ON THE JOB. ALL IN ALL AN EXCELLENT BOOK. PROVIDES REAL HELP AND KNOWLEDGE, MUST BE READ BY ACTIVE TRADERS.

really great to figure out the intricacies of options. if you need something more conventional just get hull; this book is by someone who does it for a living and has different intuitions than what you get in the ivory tower.
some of the points are great but may need more updating

This book is surely not worth reading. The formulas and analyses are more often incorrect than they are correct. As much as he likes fluffing people with PhDs (which I have - in mathematics), I can't help but feel he himself lacks the requisite skills for proper option analysis. This is not a book any serious trader, quant, risk manager, or academic should bother adding to their library.

This book provides a healthy dose of practical wisdom for options traders so that they don't blindly follow their mathematical models into oblivion. The author (Taleb) has a PhD in finance, but also has traded in the pits, he knows both theory and practice and where they diverge.

Taleb focuses on hedging, which is a trader's main task when running a large portfolio of options. Instead of using a flood of equations, Taleb relies on charts, graphs, and tables to make his points. Most of the equations & heavy mathematics are relegated to the appendix, presumably because quants (or software) will price the instruments. He covers the behavior of the Greeks (delta, gamma, vega, theta, etc.) for vanilla options as well as behavior of exotic options, and delves into the practicalities of volatility, hedging at discontinuities, and various other topics.

The book is very popular on trading desks, and although I found it pretty good, I didn't find it to be outstanding. Also, notably, the book does NOT cover credit & interest rate derivatives at all; hopefully this will be corrected in the next edition.

So if you need a book on the practicalities of hedging a portfolio of vanilla/exotic options, then get this book. On the other hand, if you want some basic options theory, or want to focus more in pricing, or need a basic introduction, look elsewhere (perhaps to Hull's or Wilmott's books).

The best book on options but there are things that NT needs to add from his web site. Things happened since and we are all eager to know his opinion framed in the practical paradigm. THe bibliography also needs expanding.
Also some of the charts. We need credit risk discussions.

This book has excellent attributes for the practitioner: it does not come from theory but uses it in the background. It looks at options as something that trades and relies in a minimum manner on research done in universities. The result is something clinical. A way of thinking that corresponds to that of traders.
True Taleb is playful at times.

this book has helped me in NUMEROUS interviews over the years... it is a book that always keeps me fresh... HOWEVER, thank god i have a solid background in derivatives - otherwise, the 107 errors i found (mathematics, definitions, explanations, etc) would have driven me to a point of complete confusion... NEVER have aloof traders edit your book - get someone who understands derivatives and is separated from the world of day-to-day trading... this book could have been the bible of understanding the risks in options - including exotic options... instead, it is just a good book... well done Taleb... but could you have been more slack with the editing?

Taleb has hit the head on the nail with this one. Risk aversion is becoming a necessity for multinational corporations they are figuring out more and more sophisticated ways to leave the little guy holding the bag. If anything this a book that needs to be read by the average speculator to check out the psychology of their big boy counterparts.

The author then takes everything one step further and clearly points out what he thinks of the various strategies that multicorps use. Backhandedly showing you ways to beat them at their own game. Great book.

Very nice coverage of dynamic hedging, with a unique point of view. Doesn't cover many types of exotic options, and the coverage of credit default options and swaps is missing. There's also no coverage of total return swaps. Many hedge funds use these products for hedging and leverage. Nonetheless, the tools of dynamic hedging are well discussed.

Dont buy this book if you have no XP as a trader !!

Taleb's writing style is unique, to say the least. If you can get past it, though, his material is solid gold!

The structure of the book is very disjointed and information dense. I typically read 4-5 pages, spent a day or two figuring out what nuance he was trying to communicate, and then was absolutely floored by the insight. I've read the book several times over and expect re-read it several more.

Taleb's risk management perspective is at odds with "pricing" but right-on for "risk management". He would willingly trade a small certain loss for a possibly large gain rather than vice versa. This perspective is probably consistent with most dynamic hedgers; you expect the hedge to be a drain on income but also to save you from catastrophic events.

As a non-trader implementing dynamic hedging programs, Taleb's perspective and insights have proven invaluable. I have avoided countless pitfalls into which I would otherwise have fallen. I look forward to future editions of this book!