Looking for the best books on options trading? For many people, options trading is about as confusing as it gets. Fortunately, there are lots of books on the subject that not only demystify options but help traders profit from them.
What Option Trading Book Is Best? (List on the Top 3 Books)
- Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits by Dan Passarelli
- The Options Playbook Featuring 40 Strategies for Bulls, Bears, Rookies, All-Stars and Everyone In Between by Brian Overby
- Option Volatility & Pricing: Advanced Trading Strategies And Techniques by Sheldon Natenberg
So wherever you are with options trading, below are three of the best books on options trading you can read.
1. Review on Best Books on Options Trading
Have you ever bought an options contract without full understanding what goes into it? It can be a little shocking to watch.
Options have a reputation for being risky and difficult. However, part of their appeal is their price. They're less money than stocks. And you get to control 100 shares.
But it's the moving parts of options that differ from stock trading. And it's those moving parts that through traders off; especially new ones.
But the great thing about options is the ability to make money in any market. Whether up, down or even sideways there are options strategies.
Make sure you check out the best books on options trading in order to get the best education. The more you know, the better you'll be at trading options.
2. Trading Options Greeks
In the options area, we use the Greeks to evaluate an option position. Delta, for example, measures how sensitive the options price is in relation to price changes in the underlying security.
Likewise, Vega attempts to measure the impact of volatility on price changes. Additionally, they're used to determine how sensitive the option is to price fluctuations.
Delta, for instance, measures an option's price sensitivity in relation to changes in the price of the underlying stock or fund. Vega, gamma, theta and rho round out the options Greeks.
Written by Dan Passarelli, "Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits," is one of the best books on options trading to add to your reading list.
You've probably heard of the terms delta, theta, vega, gamma and rho in school; they may even bring back cringe-worthy memories.
But to truly master options, you must have a robust understanding of their components or "Greeks."
Author Dan Passarelli does a fantastic job explaining the Greeks in a way that's easy to understand. He then presents the various strategies you can trade to profit off the varying Greeks.
Despite its technical nature, as an options trader, you need to know the basics. This book is a great place to start.
3. The Options Playbook: Best for Learning Options Strategies
Given the fact that its goal is to demystify option trading, The Options Playbook is a must for the first time options trader. Without a doubt, this is a great book to figure out what options strategies are right for you based on your expertise (or lack of).
Aside from that, it teaches traders the different option plays for all market conditions. At a glance, it gives users a clear, easy-to-understand explanation of over 40 of the most popular option trading strategies.
With no confusing jargon, no unnecessary mumbo-jumbo readers get simple strategies, with their reasoning broken down into a play-by-play format.
Some of the strategies include the following:
- Play Name: Short Call Spread, Long Call, Iron Condor, etc.
- The Setup: Why to run the play, the goals and reasons.
- Who Should Run It: Rookies, Veterans or Pros, based on difficulty
- Type of Play: Is it bullish, bearish or neutral?
- The Strategy: An in-depth review of each strategy, its risks and the full costs associated with multi-leg strategies.
I absolutely love the HUGE printed pages and large diagrams that are very easy to read, not to mention straightforward. Summed up, it's like a massive a "Rolodex" card file of option plays explained in simple terms.
In the grand scheme of things, it's cheaper than a single $0.15 stock option contract, AFTER commissions...and it doesn't expire - so what's there to lose, eh?
Check out our Trading Service for more information on how to trade options along with reading the best books on options trading.
4. Rookie's Corner: Best Books on Options Trading Continued
What's more, The Options Playbook features a "Rookie's Corner," a place to get your feet wet without losing your shirt. I like looking at a quick glance to see what types of options (no pun intended) are good for me being a new options trader.
For more experienced options traders, the expanded 2nd edition has an expanded section on implied volatility. I recommend you get the hardcover version. Its well made and designed for heavy usage.
Overby shows you how to use it to figure out the potential range of the stock throughout the options life. You also get a detailed section on pricing variables (Greeks) to understand how an option's price is affected by changes in market conditions.
More importantly, you learn how time decay and changes in implied volatility can affect your trade after its placed. And a plan on how to recover if things don't go according to plan; this is one feature I like.
Furthermore, readers get Options Guy Tips from TradeKing Senior Analyst Brian Overby. Like any good coach, Overby's handy insights help you put theory into successful real-world trading. Readers get a ton of content from this book which includes:
- A brief history of options
- Five common mistakes options traders make and how to avoid them
- How to manage option positions by rolling to a different month and strike
- An explanation of the difference between index and stock options
- Tips on managing early exercise and assignment and how to calculate position delta and use it to manage overall position risk of a multi-leg option strategy.
You might want to take a peek at our live trade room where we discuss many ways to trade options throughout the week.
5. Option Volatility and Pricing
Clear, concise, and comprehensive; which we love about the best books on options trading. This book is a valuable source if you want to get into the very fine and gritty details of options. For your average retail trader interested in dabbling in options, this book is like drinking from the water hose.
Sheldon Natenberg's bestselling book Option Volatility & Pricing is an essential addition to every option trader's library.
Likewise, it's often the first book new and professional options traders turn to. You'll learn how professional option traders attack the market, including their trading strategies and risk management techniques.
And, best of all, you learn how to apply the fundamental principles of option evaluation to create strategies with the highest chance of success. How great is that?
The book covers a wide range of topics as diverse and exciting as the market itself. Undoubtedly, it's an excellent pick for investors who prefer having examples and models to demonstrate different outcome scenarios before making a move.
Not only does it allow traders to delve in detail into the many aspects of option markets, but it includes:
- Option theory foundation
- Volatility contracts
- Dynamic hedging
- Volatility and directional trading strategies
- Risk analysis
- Position management
- Stock index futures and options
Even if you're not a professional trader, you can still glean plenty of useful information from the book. Regardless of where you are, understanding how market volatility relates to options pricing is key.
Once you grasp this concept, you can evaluate if the value is fair or not. Sheldon provides readers with a clear explanation of theoretical option pricing models.
He gives you examples of specific trading strategies to use in various market conditions. Moreover, his easy-to-follow descriptions help readers understand key concepts involved in trading options.
For example, risk management, the relation of options to their underlying assets, volatility, and options pricing. If you are looking for free courses on how to trade options then look no further than our online trading courses.
A word of warning, this book is a bit technical. Therefore, I highly recommend it as a second book on options trading. I haven't found anything close to the depth and breadth available in this title (that you can read without mastering advanced mathematics). If you are trading volatility strategies (we teach these in our courses), the information in this book will give you a significant edge. Every options trader should have this one on the bookshelf.
6. Your Next Steps
Options trading can be risky but also lucrative for those who understand how they work. If you're a beginner options trader, a good place to start is with learning the basics. And this is where the best books on options trading come into play.
On the other hand, if you've been trading options for a while, you may be ready to dive into more advanced techniques. Or, you could be in the middle between being an options novice and an expert.
Wherever you are with options trading, Bullish Bears can help you with their next level training program that has a lot of advanced options strategies being taught in an easy to learn way. See you in the community!