Many consider options trading an unfamiliar and daunting area of investing. Fortunately, there are plenty of excellent books written on the subject to help traders understand the options markets and learn to trade them profitably.
Here are five of the best available books that provide a clear education on options trading, as well as instruction on using various option trading strategies. At over 1, pages, the book is an exhaustive reference on trading options. The book also offers detailed advice on trading index options, trading options on futures, and measuring and utilizing market volatility. Further, McMillan provides extensive examples and illustrations of numerous option trading strategies.
Understanding market volatility and its relation to option pricing is key to helping traders conceptualize option pricing and evaluate fair value in the options market. Natenberg provides a clear, solid explanation of theoretical option pricing models, followed by instruction in specific trading strategies that have historically been the most profitable in various market conditions.
He provides a wealth of material on risk management and evaluating trading opportunities in options, and even includes material on creating your own option trading strategies. Natenberg presents his material in a clear, easy-to-follow manner and helps readers to understand the key concepts involved in trading options, such as the relation of options to their underlying asset, volatility, and option pricing and the time value of options. Options trading is particularly popular with traders who regularly trade the commodity futures markets.
Hull is a widely recognized authority on derivatives , futures and risk management who has served as a consultant to many of the best-known investment banking firms. In the book, option trading coach Sebastian and hedge fund manager Chen provide a step-by-step plan for setting up a short option investment portfolio, designed to generate steady income from selling, or writing, options.
Sebastian and Chen present the idea of essentially setting up your own individual hedge fund as an options trader. The authors offer especially helpful advice on the key options trading elements of risk management and volatility.
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