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The Best Options Trading Books


Options can be as elementary or complex as you’d like them to be. For some, it’s as simple as buying a put when bearish and a call when you’re bullish. Others create sophisticated market-making models using advanced mathematics.

Regardless of your preferred level of complexity, developing a deeper understanding of the nature of how options contracts and the options market works will be a huge benefit. Options are dynamic instruments, meaning your level of exposure to different factors will change throughout the life of an options position. Whereas shares of stock or a futures contract have the same linear exposure indefinitely.

 

Grasping the dynamic and non-linear nature of options contracts and how to combine them to create the specific market exposure that fits your market view is one of the keys to becoming a profitable options trader.

 

Thankfully, there’s tomes of literature written about options trading. From reference guides to understand the basics, to deep mathematical breakdowns of the most advanced concepts in the options world.

 

We’re going to review what we think are the ten best options trading books, separating our list into Beginner, Intermediate, and Advanced tier.

 

The Best Options Trading Books For Beginners

Options trading can be intimidating to the unseasoned beginner, and overhearing two options traders talk can sound like a foreign language. Iron Butterflies, gamma, theta, and so on. These are terms you’ll never hear in the stock or futures trading world.

 

So we’re of the opinion that the best options trading books for beginners are those that try to explain the sometimes confusing options trading concepts in the simplest possible way, almost like they’re trying to explain it to a five-year old.
 

Understanding Options by Michael Sincere
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Like Options Made Easy, Understanding Options is an introductory guide to the options markets, with the goal of giving you a basic understanding of several important concepts, rather than going deep on a few.

 

Sincere is great at boiling down the complex and confusing options market into intuitive “explain like I’m five” style explanations, which is this book’s superpower. I know whenever I get interested in a new field, if I jump straight to the dry textbooks, I’ll be completely lost. It’s absolutely essential to have an expert break things down in a manner you can understand first, which is why both Understanding Options and Options Made Easy are the clear beginner picks.

 

The Rookie's Guide to Options by Mark D. Wolfinger

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Learn to use options from veteran option trader Mark D. Wolfinger, who spent more than 20 years on the floor of the Chicago Board Options Exchange (CBOE). This was one of my first books on Options Trading. I consider Mark my mentor, and this book is still a must read.

 

Mark's writing style is sensible, easy to understand, obsessively objective and thought provoking. He has a unique way of presenting obvious but frightfully neglected facts such as an admission that, he personally; does not possess the "skills" required to determine in advance where the market is going. This is definitely one of the best books for beginners.

 

Getting Started in Options by Michael C Thomsett

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An easy-to-read and updated guide to the dynamic world of options investing. This book is a good introduction to trading options directed primarily toward the novice trader. In non-technical, easy-to-follow terms, this accessible guide thoroughly demystifies the options markets, distinguishes the imagined risks from the real ones, and arms investors with the facts they need to make more informed decisions. 

 

Options as a Strategic Investment by Lawrence G. McMillan

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This guide is one of the most well-known and trusted books on options trading. This updated version of McMillan's bestselling book contains all the essential information on options trading that you need to know to make intelligent investment decisions with confidence and success. A best-selling guide gives serious investors hundreds of market-tested strategies to maximize the earnings potential of their portfolio while reducing risk.

 

Profiting with Iron Condor Options by Michael Benklifa

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In a straightforward approach, Hanania Benklifa provides readers the practical knowledge needed to trade options conservatively. The objectives are simple: make 2%-4% a month staying in the market as little as possible. A must read for all Iron Condor traders.

 

Options Made Easy by Guy Cohen

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This book is meant to give you a broad, 30,000 foot view of the options market. Cohen explains things in the simplest manner possible while using easy-to-understand visuals as often as possible.

 

The goal of the book is to introduce you to the core concepts of options trading, not to give you a full understanding. Cohen himself admits that this book is not enough to learn options trading, but it will make reading the next book much easier as you already have a basic understanding of the most important concepts.

 

The primary drawback of this book is Cohen uses the pages to pretty liberally advertise his services at times.

 

The Bible of Options Strategies By Guy Cohen

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This is, quite simply, the most comprehensive, up-to-date, and usable guide to modern options trading strategies. Renowned options author and mentor Guy Cohen has brought together authoritative knowledge about every popular options strategy, for every type of trader and market environment. 

 

Cohen explains today’s 58 most valuable strategies, helping you consistently choose the right strategy and execute it effectively. You’ll learn each strategy’s goal, the market outlook and volatility factors that make it appropriate, its potential risks and rewards, and how proficient you should be to use it.
 

The Best Options Trading Books for Intermediates

Get Rich with Options by Lee Lowell

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Filled with in-depth insight and expert advice, this reliable resource provides you with the knowledge and strategies needed to achieve optimal results within the options market. It quickly covers the basics before moving on to the four options trading strategies that have helped Lowell profit in this arena time and again: buying deep-in-the-money call options, selling naked put options, selling option credit spreads, and selling covered calls.

 

Trading Option Greeks by Dan Passrelli

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To truly master options trading, one must cultivate a robust understanding of the “Greeks". Passarelli's book explains the impact that each of these factors has on option values, and presents various option trading strategies that seek to profit from changes in any or all of the “Greeks.” This lets traders accurately evaluate option pricing and identify profit opportunities.

 

This is one of the best options trading books for traders looking to not only understand what the options Greeks are — but also how to use them to your advantage.

 

The Best Options Trading Books for Advanced Traders

Positional Option Trading by Euan Sinclair

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Positional Option Trading makes no bones about the fact that it’s written for a professional audience. The book assumes you have a deep understanding of option pricing, models, and the mechanics and mathematics behind the options market. It doesn’t waste time pandering to beginners.

 

With that prerequisite aside, this book is one of the few out there that actually present “off-the-shelf” trading edges that you can start exploiting quickly. But unlike many books that present several trading “setups” or strategies, Sinclair doesn’t puke trading rules at you. He presents a market anomaly, explains why there’s a good reason that the arbitrage remains persistent and exploitable, then provides data to support his claims.

 

So Sinclair not only gives you a list of strategy ideas to explore that will keep you occupied for a long time, but he presents you with a mental model on how to think about trading edges so you can find and formulate your own in the future.

 

Chapter five in particular is powerful. He lists several trading edges that have persistently worked over a number of years. Keep in mind that in Sinclair’s mind, an edge isn’t a “setup” or “system.” Take it in his words:

 

“I am going to give a list of edges. Edges aren't rules. And the difference is important. A rule is a defined way to monetize an edge, whereas the edge is an observed phenomenon that could potentially be profited from in many ways. Edges can persist.”

-       Positional Options Trading, page 77
 

The Volatility Edge in Options Trading by Jeff Augen

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This is not just another book about options trading. The author shares a plethora of knowledge based on 20 years of trading experience and study of the financial markets. Jeff explains the myriad of complexities about options in a manner that is insightful and easy to understand. Given the growth in the options and derivatives markets over the past five years, this book is required reading for any serious investor or anyone in the financial service industries. — MICHAELP. O'HARE

 

One of the strategies described in the book is called “Exploiting Earnings - Associated Rising Volatility”. I started implementing this strategy in my account, trading straddles and strangles on stocks before earnings. Those strategies became the cornerstone of SteadyOptions.

 

Option Volatility & Pricing by Sheldon Natenberg

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In this options trading book, Natenberg covers everything from options trading basics to more advanced concepts like volatility and option pricing. This book does an excellent job of explaining the foundation of options theory and options trading concepts. It also provides a lot of practical advice, especially regarding risk management techniques. Overall, this book is perfect for those who want to deepen their understanding of the ins and outs of options trading.

Options, Futures, and Other Derivatives by John C. Hull

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If Natenberg’s book is the bible of options, then Hull’s book is the bible of the more expansive world of derivatives. With current editions sitting around 800 pages, it’s a massive reference textbook that very few make it all of the way through.

 

To be truthful, this book is absolutely not required for retail options traders. Even most professional options traders have never read the book cover-to-cover. The book more serves as a great reference for anyone who wants to get very deep into the options markets and beyond.

 

However, for the curious out there, this is one of the most well-regarded books on the subject and will give you a massive knowledge leg-up on the vast majority of traders.


Like this article? Visit our Options Education Center and Options Trading Blog for more.

Conclusion

90% of retail traders lose money in the stock market because they give up too quickly. Success in trading requires long term commitment, determination and discipline. It's a journey, and hopefully those books can increase your chances to succeed in this journey.

 

Edited by Kim

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