Readers' reviews: *The basic premise of this book is to long stock and delta hedge w/ out of the money warrants. This was great when the tax incentives encouraged corporations to sell bonds w/ detachable warrants rather than selling convertible bonds. In addition, valuing the warrants was tricky prior to the use of the Black-Scholes model. This strategy - delta neutral covered calls - is profitable when the market has peaked out but you can get your handed to you if you employ it in a scenario such as '99-'00. Further their reocmmendations that you short more as your warrants fall is very dangerous - shorting a lot of gamma. The warrant game played itself out and the authors made a a lot of money. This is a very interesting book written by a very profitable hedge fund manager, but I would not recommend attempting to replicate this strategy w/ LEAPS. Pricing is much tighter now so your margin of error has dramatically decreased *The strategies in this wonderful book are only employable in Asia now, and in very limited ways (often insurance and bank stocks and bonds) but you take a lot of liquidity risk, so I'm not sure if you are still paid alpha over an expected return. Still, a marvellous read. Pre-dates the Black-Scholes by five years, but in a replicating portfolio no-arbitrage method (which implies a lognormally distributed expected equity return) which Thorp then correctly pointed out was arbitrageable. This book also serves as a curious filter rule. Those who read t Read more... ReadMore and Download
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