Option trading is a contract signed between two parties which are valid for a particular amount of time.
One party has the right to buy or sell shares of a particular stock at a predetermined price from the other party within a particular time.
Profit can be achieved from a large range of stock market outcomes with limited risks.
Let us look at some of the nest books available on options trading.
Option Volatility & Pricing: Advanced Trading Strategies and Techniques
It is a book written by Sheldon Natenberg in the year 1988. It is one of the most recognized books available on options trading.
After its instant success after its release in the year 1988, it has gone through so many revisions and now it is updated to the current trend to keep in check with the most recent advanced developments and trends in trading strategies and options products.
The book includes a vast range of subjects covering many topics like basic and advanced trading strategies, pricing models, risk management techniques and volatility considerations.
Sheldon has taken a great deal to elaborately explain to the readers about successful trading and he also included the key concepts required for learning the art of successful trading.
Sheldon explains this with great finesse and ease because of his rich experience as a professional trader.
He makes sure to include the fundamentals of option theory which will teach us how to use trading opportunities to get maximum benefits.
The book explores the theory as well as the practicality of the theory while applying it in the real world.
The book has very much become a household name when it comes to people related to options trading. It is considered by many as the bible of options trading.
The main reason for this is the simplicity in which the content has been delivered, it is very easy to read and the content is rather qualitative than quantitative. Unlike other books, it doesn’t go deep into the topic of managing risks and its complexities which is not what Sheldon wants to deliver.
Sheldon instead focuses on how to think about the option value’s mathematical derivatives based on its relationship with various market factors. This book is perfect for people who are just about to begin their journey in options trading which will a very good understanding of options trading at a fairly professional level.
All the option strategies and the risks related to it are explained in a very lucid way which is very easy to grasp. This will make the concept of options trading much easier for us.
Another noteworthy feature of this book is that it not just gives plain theory without any examples of applied practicality like in most of the book. Along with the theory, Sheldon also provides examples of the risk-return of a trade.
This would, in turn, help you to choose ways in which you could express your trade idea optimally and also about the different trading styles in which you could implement the idea practically.
You will learn how to analyze your trade after implementing it and could make changes after identifying the weaknesses.
Read this book to get an overall understanding of options trading and gain expertise by applying all the optimum principles mentioned in this guide. You will not be disappointed.
Options, Futures, and Other Derivatives
This is a book written by John C Hull in the year 1989. This book is also without a doubt one of the best guides for anyone interested in starting a career with options trading. It is a time classic book about options trading. It is a good place to begin your career and to understand the different topics under the subject.
The book is written with a definitive structure that is very comprehensive and clear, written to the point and having well-balanced explanations of all the key concepts. If you can solve the various problems give at the end of each chapter, you will have a huge possibility to bloom in options trading.
Hull has written every concept very clearly and gives a very detailed view of the fundamentals of the derivatives market. He also makes it easy for the beginners to understand by delineating the mathematics side of options trade, by giving an abstract view of it instead of going on about its complexity. This delineation would explain to us the reason for the high value for derivative traders.
Hull has a way of making complex topics look a lot simpler. Even if you are a beginner who doesn’t know anything about the technicalities, you will be able to understand these complex topics due to his way of simple delivery.
It is also a very good introductory book if you’re interested in learning futures.
The math used in this book is very abstract and easy to understand. Hull uses a lot of shortcuts while deriving results in derivative theory which makes the subject a lot more interesting but he doesn’t stop there, for more curious readers and in case of any confusion, he has provided rigorous proofs for these derivations of results in the appendix.
If you feel that options trading is very alien to you but still wish to learn the subject, this book is a must-read and it has a very engaging narrative tone. The book allows you to build your fundamentals slowly and strongly.
Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profit
This is a book written by Dan Passarelli in the year 2008. Dan is a successful professional in the field of options trading. This is a very important guide for freshmen who are interested in learning about options trading. It also is a very useful guide for professionals to improve their game.
This book offers a fresh perspective on options trading and valuation. It explains in detail about the greeks in a very simple and abstract style. Greeks are the best techniques for executing trades and valuing options irrespective of the market conditions prevailing at that time. The greeks which we need to become proficient are theta, vega, gamma, and rho.
Greeks can be used very skillfully to enhance trading strategies which demand profit from volatility, change in interests or time decay. This is explained to us along the way using different types of examples and charts. The author also discusses how efficient the use of greeks can result in very accurate pricing and trading. We also get to know about a wide range of opportunities for implementation.
The book is being continually updated to keep up with the current trend, with new concepts being added with each update. Many new topics have been added over time like put-call clarity, information on spreads, trading volatility, synthetic options, and various advanced trading options.
New ways are being explored in the book on how to make use of the dynamics of option pricing to improve our trading. To achieve long term success in options trading we need to be well versed with the greeks. This will help you to avoid losses by limiting risks and improving the profit potential.
Due to his proficiency and expertise with options trading, he provides us with tools that would help us to effectively implement it in our trading.
This book is a must-read for everyone who is or wants to get related to options trading. It is useful to traders of all levels because of its unique perspective and approach.
You will get a complete understanding of the real-world trading scenarios and get the most out of today’s dynamic market.