Investing in options trading books is very important if you’re getting started as an options trader, so we’ve provided you with a list of the best options trading books.
Have you ever bought an options contract without fully 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 those moving parts that throw traders off, especially new ones. The great thing about options is the ability to trade in any market. There are options and strategies, whether up, down, or even sideways options and strategies.
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Table of Contents
List of the Best Options Trading 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
Best Stock Market Books by Trading Niche
1. Trading Options Greeks
We use the Greeks to evaluate an option position in the options area. Delta, for example, measures how sensitive the options price is 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 to underlying stock or fund price changes: Vega, gamma, theta, and rho round out Greek options.
Dan Passarelli wrote “Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits,” 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 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 trade strategies to profit off the varying Greeks. Despite its technical nature, you need to know the basics as an options trader. This book is a great place to start.
Purchase Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits
2. The Options Playbook
Given that its goal is to demystify option trading, The Options Playbook is a must for the first-time options trader. This is a great book to determine what options and strategies are right for you based on your expertise (or lack thereof).
Aside from that, it teaches traders the different options played for all market conditions. It gives users a clear, easy-to-understand explanation of over 40 popular option trading strategies.
With no confusing jargon and 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.
Purchase The Options Playbook.
Rookie's Corner
Moreover, The Options Playbook features a “Rookie’s Corner,” a place to get your feet wet without losing your shirt. I like looking at a glance to see what options (no pun intended) are good for being a new options trader.
For more experienced options traders, the expanded 2nd edition has an expanded section on implied volatility. I think you should get the hardcover version. It’s well-made and designed for heavy usage.
Overby shows you how to use it to determine the stock’s potential range throughout the options life. You also get a detailed section on pricing variables (Greeks) to understand how changes in market conditions affect an option’s price.
More importantly, you learn how time decay and changes in implied volatility can affect your trade after it is 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 calculating position delta and using it to manage the overall position risk of a multi-leg option strategy.
You might want to peek at our trade room, where we discuss many ways to trade options throughout the week.
3. Options 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 options’ finer and gritty details. This book is like drinking from the water hose for your average retail trader interested in options.
Sheldon Natenberg’s bestselling book Option Volatility & Pricing is essential 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. It’s an excellent pick for investors who prefer having examples and models to demonstrate different outcome scenarios before moving.
Not only does it allow traders to delve in detail into the many aspects of option markets, but it includes the following:
- Option theory foundation
- Volatility contracts
- Dynamic hedging
- Volatility and directional trading strategies
- Risk analysis
- Position management
- Stock index futures and options
Final Thoughts: Options Trading Books
Even if you’re not a professional trader, you can still glean plenty of useful information from the book. Understanding how market volatility relates to options pricing is key regardless of where you are. Once you grasp this concept, you can evaluate whether the value is fair. Sheldon provides readers with a clear explanation of theoretical option pricing models.
He gives 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 want free courses on trade options, look no further than our online trading courses.
A word of warning: this book is a bit technical. It’s better as a second book on options trading. 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.
Purchase Option Volatility & Pricing.
Frequently Asked Questions
- 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
Options trading can be profitable if traders know how to implement the right strategy and perform the necessary technical analysis skills before entering a trade.
- Open a brokerage account
- Choose an options strategy
- Pick an options strike price
- Choose an expiration date
- Execute your order
