What is the role of derivatives in contrarian investing? For us, derivatives are the means for which we implement our investing strategies (Value Investing, Trend Following) and hedge our portfolio. Our philosophy is that derivatives are the means, not the ends to get us to where we want to go. If investing is a journey, then strategy is the route and derivatives are one of the many vehicles that we can use to travel the journey.

Options

Contrary to popular belief, options are not inherently risky. When used properly, it is very safe and can even reduce your risks significantly. When misused or used wrongly, options can be very dangerous. Thus, before you use options, please make sure you really know what you are doing. Below are the books that we find useful in teaching us about options:

A complete in-depth understanding of options requires delving into the complex mathematical world of theoretical option pricing and volatility. For beginners, this can be too overwhelming. Therefore, we recommend this introductory book that assumes no prior background knowledge on the reader. From the inside flap of this book, ?Drawing on his years of experience as both a successful options trader and an acclaimed options trading instructor, author and financial expert George Fontanills has crafted a comprehensive course to help you avoid these common, costly, and unnecessary mistakes. In this fully updated Second Edition of The Options Course, Fontanills returns to improve and expand on all the invaluable information and advice he offered in the bestselling original edition of The Options Course.?

To attain a more complete and in-depth understanding of options, we recommend that you read and understand this book. It delves into the mathematical foundations behind the concepts of volatility and theoretical option pricing, which are the cornerstone concepts for understanding options at the professional level. Since this book is written from a practitioner?s perspective, it is clear and easy to understand and not impractically and overly complex, as opposed to an academic?s perspective. Thus, it also includes advanced trading and risk management strategies that are applicable to the markets for stocks, indexes and futures.