The options abound, but not all are equal.
This article lists some of the best options trading books that should be on your radar. They are great for both beginners and seasoned investors. Let’s dive in!
What is Options Trading?
Before anything else, let’s talk about options trading. In a nutshell, options trading is the trading of instruments that gives the right to sell a specific asset at a specific price and at a specific time. More so, it allows the speculation of investors without buying an asset.
Meanwhile, an option is a contract that connects to an underlying asset. It has a specific period, one day or a couple of years. While buying an option gives you the right to trade an asset, it isn’t an obligation.
Furthermore, options are also derivatives. It means that it derives its value from another asset. Hence, the stock’s price is heavily influenced by the option contract’s value.
Lastly, options trading allows various speculations. For instance, you can speculate if the price will rise or fall. In addition, you can also speculate the extent of the price changes and when they will happen.
Options as a Strategic Investment: Lawrence McMillan
If you’re looking for the best options books, this is one title not to miss. With several editions available, the book has updated insights that can help all types of options traders. You can learn about market strategies that can maximize profits and minimize risks.
Looking at reviews of these books, people were sharing a lot of positive feedback. For instance, some readers even dub it the bible of the options community. It’s the benchmark of many other books on option strategies.
Risk management strategies are often boring topics. However, McMillan deals with such in a fun and innovative manner. Hence, you can expect the book to be engaging and insightful, even if you’re a newbie.
The book starts by tackling the basic properties of stock options. Plus, it discusses call and put options in detail. In addition, the author also talks about the fundamentals of trading and measuring volatility.
Option Volatility and Pricing: Sheldon Natenberg
Global firms often use this book for new traders they employ. Like many of the books on this list, it highlights trading strategies and risk management techniques. It’s a comprehensive guide that will benefit even traders with vast experience in the options market.
The book has various chapters that digest options trading into comprehensible topics. For instance, it starts with discussing the foundations of options theory. This is a great way to gain background knowledge. The book covers other topics, including dynamic hedging, risk analysis, position management, and volatility contracts.
Looking at the reviews about this book, one highlight is how it’s clear and concise. More so, many people also highlight the qualifications of the author. Natenberg holds seminars in the largest trading firms, cementing his industry authority.
Fundamentals of Futures and Options Markets: John Hull
Another top pick for the best book to learn options trading, it has real-life and numerical examples. As a result, the topic is easier to comprehend, even for someone with zero experience in options trading. Your limited mathematic background is never a hindrance.
Learning options trading can be intimidating because of its mathematical nature. Nonetheless, even with no or limited knowledge of calculus, the book discusses the topic in a way you’ll easily understand.
One of the best things about the book is that it considers the current financial crisis. This way, it’s a timely discussion.
Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits: Dan Passarelli
Many factors influence options trading. For instance, time and volatility are critical in understanding the market and making better trading decisions. These are some factors that the author talks about in this book.
The “Greeks” refers to the five factors influential in options trading — delta, gamma, theta, vega, and rho. These techniques are fundamental in options valuation. Knowledge of such will help you execute trades regardless of current market conditions.
Lastly, the book also covers interest rates, dividends, and volatility. These topics are essential in having more accurate price information.
The Option Trader’s Hedge Fund: Dennis Chen and Mark Sebastian
The author of the book is also a hedge fund manager. Therefore, you’ll gain first-hand insights into how the market works. Further, it comes with real-world examples, which makes the topics more practical and easier to understand.
Building a solid business model is difficult for newbies. Nonetheless, the author extends a helping hand. More so, Sebastian uses an insurance company as an example, which is the basis of the trading techniques in the book.
The book begins by talking about the insurance business. Meanwhile, the succeeding topics include risk management, trade execution, and lessons from the trading floor.
Options Trading Crash Course: Frank Richmond
The title itself will already give you an idea of one of the best options trading books. It’s a crash course for newbies looking to make money in options trading. Of course, it does not provide any guarantee of profitability.
However, with the insights the book imparts, you can increase your chances of earning.
According to the book’s descriptions, readers should give it at least a week. After which, you can triple your profit by applying the techniques you’ll learn. Within a month, meanwhile, you’ll become more confident in investing.
In this book, you’ll learn about the different trade types and how you’ll profit from each. It also discusses strategies to maximize your investment capital. Plus, it will let you analyze market patterns and how to take advantage of them.
All methods the author talks about in this book were proven to be effective.