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Title: Beat the Market: A Scientific Stock Market System by Edward O. Thorp ISBN: 0-394-42439-5 Publisher: Random House Pub. Date: October, 1967 Format: Hardcover List Price(USD): $12.95

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Average Customer Rating: 4 (2 reviews)

Rating: 5
Summary: Interesting and workable strategy for thinly traded warrants
Comment: Agree with much of the prior review. That said, if you can find thinly traded warrants (i.e., where there is less pricing efficiency due to the low trading volume), this book presents a very workable strategy for the individual investor. In addition, the book does outline an approach for hedging the "warrant component" of convertible bonds. In my opinion, the key is to stay in the low-volume (and, therefore, more market in-efficient) securities, so that an individual investor can use one's small size as an advantage by trading where the larger funds cannot.

Rating: 3
Summary: Great strategy 40 years ago when there was no Black-Scholes
Comment: 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

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