Reading Traders, Guns & Money leaves me with the distinct impression that unless I want to part with my money, I'd best leave the cutthroat business of derivatives trading to the professionals.
The book's 352 pages are filled with examples of naive investors sucked dry by sophisticated number-crunchers who use smoke and mirrors to point to potential profits while stuffing the hard cash into their own pockets.
But in all the cases of investors being fooled, author Satyajit Das offers the advice of 'buyer beware'. A lack of education, among professional and retail investors alike, leaves low-hanging fruit for those that know the business.
The book describes how that low-hanging fruit was picked by traders during the Asian financial crisis, and Das warns investors, banks, and even regulators to be wary as the big guns from New York and London circle to exploit the region's inefficient markets.
'In the derivatives industry the market here [Asia] is jokingly referred to as the Wild Wild East,' Das says in an interview from his home in Sydney. 'If you're able to understand these market inefficiencies, you will be able to gain at the cost of other players.'
But Das's book contains more than investor advice, with plenty of tales of gluttonous excesses and trading-floor antics gleaned from more than 20 years in the industry.
For the uninitiated, derivatives are contracts whose value is based on an underlying asset, index, or other investment. Futures, options and warrants are different forms of derivatives. Large, risky positions in the derivative markets carried much of the blame for the Asian financial crisis of the late 1990s.
