Every time you buy or sell stock to rebalance your hedge, you pay a little toll. The bid-offer spread. The commission. The market impact. These are transaction costs, and they are the silent killer of options hedging strategies.
You know how every finance influencer tells you “minimize your trading costs”? Cool advice. But nobody tells you how to actually measure those costs. That is what chapter 21 is about. It turns out measuring transaction costs is surprisingly hard, and every method has problems.
Harris calls chapter 14 the most important chapter in the book. Bold claim for page 297, but he backs it up. The lesson is simple and painful: uninformed traders lose money no matter what they do. Not because they pick the wrong side. Because they trade at all.