Options trading can be tricky, you must agree to this fact! However, it can offer unimaginable returns within a short period of time. It can offer several advantages concerning an investment that bonds and stocks are not able to. But it has to be used appropriately to be able to do so.
This blog post intends to introduce you to some of the best books on options trading. Reading these books would definitely assure that you have a better understanding of options trading terminologies and the strategies associated with them.
Also Read: The Best Books on Swing Trading – Top Recommendations
The Best Books On Options Trading
Options trading as an investment can be pretty mysterious to a lot of people. Thankfully, many books on this subject can demystify it and help anyone reading them gain profit from it.
Here is a look at four of the best books on options trading.
Lawrence McMillan’s Options As A Strategic Investment
Lawrence McMillan’s fascinating 1980 book is widely considered to be the Bible when it comes to options trading. This is not without reason either, as it provides its readers with comprehensive practical strategies specifically designed to reduce risks.
Although the book is more than a thousand pages, it is said that reading it through will help a long way in maximizing profit potentials. McMillan deep dives into the usage of options and explains the relationship between tax laws and profit or loss of trading.
In addition, you can also expect to find detailed guidance on how to measure market volatility and use it for your benefit
Sheldon Natenberg’s Option Volatility And Pricing
To evaluate options strategies, it is crucial to understand how the volatility of the market plays a role. Natenberg’s book addressed this basic but somewhat overlooked concept in many details to help traders get more wins.
The book clarifies theoretical pricing models and instances of specific strategies which have a proven track record of historical profitability.
Natenberg also provides some easy steps and guidelines to help readers comprehend certain critical concepts in trading. This includes risk management, options pricing, relation to underlying assets, and of course, market volatility.
John Hull’s Fundamentals Of Futures And Options Markets
For traders who are trading in the commodity markets, options trading tends to be quite popular. Hull’s book is a classic in understanding the options and future in trading markets in this context.
But before anything else, the book is said to function as a derivate authority on risk management and futures. Through his book, Hull has been a consultant to almost all the well-known investment firms too.
Dan Passarelli’s Trading Options Greeks: How Time, Volatility, And Other Pricing Factors Drive Profits
Passarelli’s informative account explains the impacts of certain driving factors on the values of options trading. It also talks about some strategies that allow profitable gains from price changes too.
As a result, traders can evaluate options accurately in terms of pricing and identify profit opportunities. So the driving factors in question are –
- Theta, or time values of options
- Delta, or price movements of options related to asset prices
- Rho, or price movements that are caused by specific changes in interest rates
- Vega, or option price changes related to volatility
Dennis Chen and Mark Sebastian’s The Options Trader’s Hedge Fund
The Option Trader’s Hedge Fund is a fascinating book on options trading strategy co-written by Mark Sebastian – options trading coach, and Dennis Chen – hedge fund manager. It provides options traders with an effective business model which can assist them to earn consistent and profitable returns.
This book was published in 2012. It provides a detailed primer for establishing an investment portfolio of short options intended to bring a consistent income from writing or selling options.
Also Read: The 4 Best Fundamental Analysis Books of All Time
Endnotes
The bottom line is that options trading is not that difficult concept once you can grasp its basics. It can prove advantageous and detrimental to your trading habits, depending on how you choose to use it.
But we hope that our list of the best books on options trading will help you understand and execute option strategies with a lot of precision. While we cannot say that one book is better than another, all of them are worth a read due to the whole array of perspectives on options trading that they offer.