The Insider Edge: How to Follow the Insiders for Windfall Profits (Wiley Trading)

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Product Description

Bestselling trading author Guy Cohen introduces the OVI indicator to stock trading �

More fortunes are made from trading stocks than any other financial instrument, and these windfalls are available to anyone who has access to the right information.�

Presenting the methods used by the best traders in the market,� The Insider Edge: How to Follow the Insiders for Windfall Profits uses options transaction data to reveal what "informed traders" are doing, and how anyone can take advantage of these techniques.�

Whether the markets are choppy or trending, it always pays to wait for a clear opportunity. Any good trader knows that they need an Edge to excel, and this book demonstrates how the combination of specific chart patterns, author Guy Cohen's proprietary OVI indicator, and a robust trading plan, when combined, will deliver success.

In The Insider Edge, Guy Cohen reveals: �

• How you can profit from options without having to trade or even understand them!
• Why the smart money often gravitates to the options markets.
• How options transactions can often reveal the direction of the stock price.
• How you can trade using information typically reserved for the pros.
• A trading plan the delivers maximum safety and windfall profits.
• How to use his proprietary OVI indicator online for free, so you can start to follow the insiders. 

The author emphasises that The Insider Edge is for anyone who wants to trade stocks. No options knowledge is required to benefit from this book.� His method involves observing what the smart options traders are doing, and then following them.  This is what gives you The Insider Edge.

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The Insider Edge: How to Follow the Insiders for Windfall Profits (Wiley Trading) Review

I completed reading the book in 4 days and am a critic for 'The Insiders Edge'. Generally, I do not make any comments on most of the books but being a critic, I am giving 5 Stars because the author Mr. Guy Cohen has written an excellent concept in a simple way that can be easily understood even by a layman without any sophisticated mathematical/technical/ option concepts even though I may not agree logically whether it will work always. I come from Math/Science/Fundamentals background where I always analyze stocks based on moat of business, the Earnings/Cashflow/Valuation perspective of business and will be biased to technical indicators as I do not believe/understand much.

This book is targeted to Short-Term Speculators and with this in mind, I read the above book which summarizes into 3 main concepts such as "Chart Pattern + OVI (Option Volatility Indicator) + Trading Rule = Success". Chart Patterns in simple terms explains how to spot a bullish trend in terms of VMV (If we write the letters VMV closely and tilt to 20 degree angle to down side towards right - we get a bullish chart pattern of 'Support' and 'Resistance' lines if we view the stock price for 3 months or more) and bullish channel pattern which is same as VMV but goes on sideways instead of down side. Mr. Guy has created an OVI Indicator based on Options data where the insider's has an edge and start buying Call or Put Options for Stocks/ETF's and he has devised a own indicator based on options buying pattern algorithm which simply measures in the form of graph of -1 to +1. Anything above 0 to +1 indicates a bullish pattern and anything below 0 to -1 indicates a bearish pattern. If we combine the above chart pattern and OVI indicator with positive traits along with volume and more Open Interest call volume, then the chance of stock peaking is high. The final 'Trading Rule' suggests that once the stock is above the resistance line, we can buy the stock with a stop limit and once when the stock reaches certain high (Based on 0.382 times the difference of Resistance and Support lines), we can sell the stock at 50% of our original investment. Then we can move the sell stop limit for the reminder of investment to the new high value and if it reaches more again by the same above formula we can sell the remaining portion. We need to applaud Mr. Guy who has given free tools through his website which is worth more than 500 dollars as he clearly shows the pattern of 12 Express Stocks where most of them are quality business to my surprise. My strong critic for his concept is whether the chart patterns work well and how to interpret the chart patterns. If you are a Math/Science guy like me and rely more on numbers/logic, interpreting chart pattern is complicated as it's an ART and most of the chart pattern resembles like VMV to my eyes:-). I hope it's me and am not criticizing the author or anyone but technical analysis to me doesn't have a sound logical basis. With the above criticism in my mind, Mr. Guy has developed a beautiful OVI indicator where he gets 10/10 as it is completely logical to derive based on option calls. The Trading plan is good but I would take all the profits at first move itself as am not sure whether the second move will work out for me. The same above procedure can be repeated for Bearish patterns with reverse moves and being a bull most of the times, I am passing the bearish patterns.

Coming to my personal investing traits of being a Fundamental Investor who relies more on quality of business, financials and Valuation, I find this book will be extremely useful even if I invest for medium term to long term provided the FAIR MARKET VALUE (INTRINSIC VALUE) of any stock/ETF is higher than current market price of the stock. I am a huge fan of Morningstar.com where they analyze the stock in depth and provide Intrinsic value for 1700 stocks which basically states that how much the business is worth per share based on future cash flow analysis discounted to the present value. I checked all the 12 Free Express Stocks which he posted in his website theinsideredge.com and found that all 12 stocks such as BAC, C, GOGL, AAPL, AMZN are excellent quality business where most of the above stock Intrinsic value is higher than market price at present. If such is the case, then I can use his entire book concept of: "Chart Pattern + OVI Indicator + Intrinsic Value Concept" and start investing for medium term by buying "Deep In the Money" Call option with a long-dates of 1 year or more and am pretty sure, I will make considerable returns without speculating for short-term. In other words, I can even do both short-term investment if I spot a beautiful tight chart pattern along with positive OVI with Intrinsic Value more than current market price where even if I miss the stock going up, if I wait patiently for some time, I can recoup the losses and may gain substantially as most of them are quality businesses which will come back a.k.a Peter Lynch/Warren Buffet Style!!

Hats off to Mr. Guy Cohen who deserves to get '5-Star' for his simple, clear, crisp views on a tough subject (Sometimes it's repeated but it helps) where his numerous examples of the concepts make reader fine-tuned to the concept along with his website!! Great Book if you are Medium-Term Investor and a Short-Term Speculator!!

UPDATES ON SEPT 28TH, 2012:

Folks - It seems Mr. Guy is going to come out with a new Book 'Options Made Easy' (3rd Edition) with specific focus on how to buy/sell options based on OVI and it will certainly satisfy the needs of folks like me who will be more in-tuned in buying deep-in-the-money options based on OVI. Please review the link at:

http://www.amazon.com/Options-Made-Easy-Profitable-Trading/dp/0133087891/ref=dp_ob_title_bk

Meanwhile, I have a small request to the Author Mr. Guy Cohen who can sequence the above 'Options Made Easy' book logically starting with Chapter 1 - Economic Analysis & Stock Market Cycles : Chapter 2 - The Basics of Fundamental Analysis : Chapter 3 - The Basics of Technical Analysis : Chapter 4 - Introduction to OVI : Chapter 5 - Introduction to the Options (Calls and Puts) : Chapter 6 - Into the Marketplace (Terminology of Options) : Chapter 7 - An Introduction to Greeks : Chapter 8 - Using Basic Options using OVI : Chapter 9 - Two Popular Strategies (Covered Call & Synthetic Calls): Chapter 10 - Intermediate Level Options (Bull Call Spread and Bull Put Spreads): Chapter 11 - Two Basic Volatility Strategies : Chapter 12 - Two Basic Sideways Strategies : Chapter 13 - Trading and Investing Psychology : Chapter 14 - Putting it All Together : Chapter 15 - NEW CHAPTERS...

The basic idea behind logically arranging the above chapters is that readers like me will have continuity of how to use options starting from Economy to Stocks to Options Terminology to OVI to Intermediate Strategies to Summary!!

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