Lawrence McMillan is considered by many to be one of the top options educators and experts in the world. His first book on options, Options as a Strategic Investment, is in its fourth edition and is a perennial bestseller among options texts.

Many refer to it as the “Bible of Options Trading”. The 100,000+ readers of this classic who are not familiar with his later work reviewed here (McMillan on Options) might wonder if it is merely a re-write of his first book. The answer is definitely no. McMillan’s first book is academically oriented and is formatted like a textbook that categorically and systematically covers virtually all aspects of options trading.

McMillan on Options is an entirely new and quite a different book. It is marked by its clarity and excellence and actually makes for easier reading than its predecessor. Its main focus is as a practical guide for options traders that concentrates on the application of options to actual trading situations (i.e., practical rather than theoretical discussion). It is replete with actual trading examples, many derived from McMillan’s own trading experience.

In addition, it contains a collection of trading tales, both humorous and tragic, that serve to illustrate the pitfalls and rewards of trading for neophytes and to elicit vivid memories for seasoned traders. Options as a Strategic Investment dealt exclusively with stock options, whereas McMillan on Options deals extensively with options on futures and indices, as well as options on individual equities.

The book is organized into seven long chapters. Like the earlier book, it is lengthy (more than 600 pages). The major sections are well organized and cover a number of interesting topics as noted below.

The first section covers introductory material. While the book is clearly designed for experienced readers, this section does provide all necessary definitions and a brief review of strategies with examples that will serve to get newcomers up to speed. A nice feature of the text is that it does not require knowledge of the technical concepts that underlie options in order to use the tactics, which are explained immediately.

A section illustrating the versatility of options covers the many uses and advantages of equivalent positions, how to trade expirations and the use of options to protect a stock portfolio. Readers are taught effective methods of using options as an indicator for the purpose of trading the underlying market, such as the use of options volume to spot stocks about to make a large price move due to a takeover bid. All traders, especially day traders, will find McMillan’s treatment of options volume as a predictor of impending large price moves especially valuable. The book presents several reliable trading systems and methods, ranging from day trading to intermediate term systems.

A lengthy treatment of an inter-market spread trading strategy is especially impressive. Readers with an interest in delta neutral options trading and volatility trading will find the 118-page section on these approaches to be the most comprehensive and detailed coverage available anywhere. Any options trader who does not buy this masterpiece will lose thereby.

Review by
Edward Dobson, President
Traders Press, Inc.
Greenville, SC