Erik Kobayashi-Solomon on His Book, The Intelligent Option Investor

Erik Kobayashi-Solomon discussed his book, The Intelligent Option Investor: Applying Value Investing to the World of Options, at MOI Global’s Meet-the-Author Summer Forum 2019. Erik is founder of Framework Investing.

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About the book:

If you’re a value investor who wants to get your money into the lucrative options market, forget about day trading, chart patterns, and market timing. This systematic book lays out a path to long-term wealth by taking positions on companies with real intrinsic value–the kind Ben Graham and Warren Buffett would invest in.

Leave the complex algorithms and “Greeks” for the floor traders. Erik Kobayashi-Solomon, former investment banker, hedge fund risk manager, and valuation consultant to the World Bank, gives you the knowledge and sophistication to understand what options pricing reveals about the market’s estimation of future stock prices. He then demonstrates how to find tremendous opportunity for low-risk, high-profit investments in the difference between the market’s mechanized price ranges and ones made by you, a thoughtful human being armed with the insight this book offers.

Everything you need to make options a powerful contributor to your portfolio is inside, including:

• A thorough explanation of what options are and what their prices can tell you about the market’s expectations for the future price of a stock
• A proven way to envision the risk/reward trade-off for stocks and options and a straightforward method to use the flexibility and directionality of options to tilt the risk/return balance in your favor
• A robust and intuitive framework for assessing the value of a company

• Strategies to avoid the most common behavioral pitfalls
• Tips for using the information on an option-pricing screen
• Thorough coverage of important option investment strategies, including “covered calls,” “protective puts,” and “collars”

Regardless of your experience level with options, this versatile guide makes you a better investor. Beginners get a turnkey solution to growing wealth in options, experienced investors gain savvy guidance for fine-tuning their practices, and professional investors learn how to effectively incorporate options into a portfolio.

Understanding valuation in this perceptive light lets you earn the consistent profits of The Intelligent Option Investor.

The Intelligent Option Investor is the hands-on guide to using a cuttingedge valuation framework in the fast-paced options market to boost growth, protect gains, and generate income.

It explains how to use your insightful human mind to recognize when mechanized options pricing undervalues a stock. Once you see an opportunity, you’ll have all the tools you need to execute a fact-based decision about how and when to invest in the company.

About the author:

Erik Kobayashi-Solomon is the author of The Intelligent Option Investor: Applying Value Investing to the World of Options (McGraw-Hill, 2014) and the founder of Framework Investing, a firm that trains institutional investors how to make effective use of options in directional investment and hedging strategies.

Options represent, Erik believes, singularly powerful financial tools that tend to be mis- and / or under-utilized by value-oriented investors because of unfamiliarity with the instruments.

As three academics at AQR pointed out in a 2013 paper entitled Buffett’s Alpha, a significant portion of Warren Buffett’s investment outperformance can be attributed to his use of leverage, gained through the float from his ownership of insurance companies.

Erik has been asked to teach BlackRock investing teams about behavioral biases and how to overcome them and was hired by the International Financial Corporation (World Bank Group) to design and build a standardized model to value emerging market private company investments. He has spoken at the University of Chicago Booth School of Business, Northwestern Kellogg School of Business, the New York Society of Security Analysts, and at numerous broker-sponsored educational seminars.

Before founding Framework, Erik served as the head of listed derivative operations for Morgan Stanley Japan, the founder of a quantitative hedge fund and the market risk manager of a value-based global long-short hedge fund, where he also acted as an analyst for Japanese equity investments. He moved to Chicago in 2006 to head up Morningstar’s semiconductor research team and later co-authored the OptionInvestor newsletter while acting as Morningstar’s Market Strategist.

Erik grew up in Houston, Texas as the son of a NASA scientist father and a professional violinist mother. He graduated Magna Cum Laude and Phi Beta Kappa from the University of Texas at Austin, majoring in Asian Studies and Japanese. After working in Japan for several years as a teacher, translator, and television actor, he returned to the U.S. to attend business school at Thunderbird, the international business school now a part of Arizona State University. He graduated Summa Cum Laude from Thunderbird and was selected as the outstanding student of his graduating class.

Watch our background interview with Erik Kobayashi-Solomon: