Investing

What Are The Best Options Trading Books?

The best options trading books show you how to limit risk, increase your income, and apply strategies to make money in sideways markets.

1 – Options As A Strategic Investment

Larry McMillan is widely regarded as an options guru. He has been featured on CNBC and Bloomberg TV, traded professionally, and been awarded the prestigious Sullivan award by the Options Industry Council for his contributions to the U.S. options markets.

He is also the author of one of the seminal works in options trading: Options As A Strategic Investment.

McMillan’s book is a long-time bestseller and must-read for any student of options trading strategies.

It is so comprehensive that it may be the only options book you ever need.

Indeed it earned McMillan so much respect that he has been sought after for quotes by Barron’s, Futures Magazine, and TheStreet.com among others.

It’s no surprise McMillan became an options expert. He is highly quantitative, having earned a B.S. Degree in Mathematics and an M.S. in Applied Mathematics and Computer Science.

But he is not just a numbers guy. He also communicates and teaches in a clear, matter-of-fact way that makes it easy for readers to follow along and pick up the options techniques he describes in Options As A Strategic Investment.

> Related: Best Options Trading Brokers

What You Will Learn

Stock Options Basics	Exercise and assignment Options symbology Order entry Profit graphs
Covered Call Writing	The importance of covered call writing The total return concept of covered writing Computing return on investment Execution of the covered write order Selecting a covered writing position Protection in a covered write
Call Buying	Risk and reward for the call buyer Which option is a buy? Advanced selection criteria
Other Call Buying Strategies	Synthetic put / Protected short sale Simulated straddle / Reverse hedge Ratio of long calls to short stocks
Naked Call Writing	Uncovered (naked) call options Philosophy of selling naked calls Risk and reward
Ratio Call Writing	The ratio write Selection criteria Variable ratio write
Bull Spreads	Ranking bull call spreads Ranking bull put spreads Uses of bull spreads
Bear Spreads	Ranking bear spreads Uses of bear spreads
Calendar Spreads	Neutral calendar spread Bullish calendar spread Three expiration series
Butterfly Spreads	Selecting the spread What is a butterfly spread?
Ratio Call Spreads	What is a ratio call spread? Selecting the ratio call spread
Combining Calendar & Ratio Spreads	Ratio calendar spread Choosing the spread trade strategy Delta neutral calendar spreads
Reverse Spreads	Reverse calendar spread Reverse ratio spread Reverse ratio backspread
Diagonalizing a Spread	Diagonal bull spread Owning a call for “free” Diagonal backspreads
Put Option Basics	Put strategies Pricing put options Effect of dividends on put premiums Exercise and assignment
Put Option Buying	Put buying vs short sale Selecting which put to buy Ranking prospective put purchases Loss limiting actions
Stocks & Puts	Which put to buy? Tax considerations Put buying as protection for the covered call writer No cost collars
Buying Puts Alongside Calls	Straddle buying Selecting a straddle buy Buying a strangle
The Sale of a Put	Uncovered put sale Naked put write Buying stock below market price Covered put sale Ratio put writing
The Sale of a Straddle	Covered straddle write Uncovered straddle write Selecting a straddle write Strangle (combination) writing
Synthetic Stock Positions	Synthetic long stock Synthetic short sale Splitting the strikes
Basic Put Spreads	Bear spread Bull spread Calendar spread
Spreads Combining Calls & Puts	Butterfly spread Combining an options purchase and a spread Complex options strategies
Ratio Put Spreads	Ratio put spread Deltas Ratio put calendar Ratio calendar combination
LEAPS	LEAPS basics Pricing LEAPS LEAPS vs short-term options LEAPS strategies Speculative option buying with LEAPS Spreads using LEAPS
Options & Treasury Bills	How the Treasury bill/options strategy works
Arbitrage	Put and call arbitrage Dividend arbitrage Conversions and reversals Carrying costs Risks in conversions and reversals Interest plays Box spreads Variations on equivalence arbitrage Effects of arbitrage Risk arbitrage using options Pairs trading Block positioning
Mathematical Applications	Black-Scholes Model Expected return Applying calculations to strategy decisions Institutional block positioning
Index Options & Futures	Cash-based options Options strategies using index options Put-call Ratio (PCR)
Stock Index Hedging Strategies	Market baskets Program trading Index arbitrage Market basket risk Impact on the stock market Simulating an index Trading the tracking error
Index Spreading	Inter-index spreading
Structured Products	Riskless ownership of a stock or index Structure of a structured product Cash value Price behavior prior to maturity PERCS Price behavior PERCS strategies
Futures & Futures Options	Futures contracts Options on futures Futures options trading strategies Commonplace mispricing strategies
Futures Options Strategies for Futures Spreads	Futures spreads Futures options in futures spreads
Basics of Volatility Trading	Moving averages Implied volatility Volatility of volatility Volatility trading
How Volatility Affects Options Strategies	Vega Implied volatility and delta Effects on neutrality Position vega Outright options purchases and sales Time value premium misnomer Volatility and the put option Buying and selling straddles/strangles Call bull spreads Vertical put spreads Put bear spreads Calendar spreads Ratio spreads and backspreads
Distribution of Stock Prices	Volatility buyer’s rule Distribution of stock prices Misconceptions about volatility Pricing of options Probability of stock price movement Expected return
Volatility Trading Techniques	Two ways volatility predictions can be wrong Trading the volatility prediction Trading volatility skew
Advanced Options Concepts	Neutrality The Greeks Advanced mathematical concepts
Taxes	Basic tax treatment of options Exercise and assignment Special tax problems Tax planning strategies for equity options
Best Options Strategy	Mathematical ranking

2 – Trading Options For Dummies

Trading options has its pros and cons. You can buy protection, similar to insurance in order to limit downside risk on stocks you own, but it will cost you money out of pocket to do so. And you can generate income with covered calls but limit upside gains.

So how do you weigh the costs and benefits of trading options?

Trading Options For Dummies is written to help you make those cost-benefit assessments, build strategies to win no matter what the market conditions, and broaden your portfolio with equity, index, and ETF options.

It is not as exhaustive in its coverage as McMillan’s Options As A Strategic Investment but it will get you up to speed on key options trading strategies that enable you to:

Buy equities at lower prices
Increase your income on existing and new portfolio holdings
Protect your investments from share price declines
Benefit from share price movements, up and down, without outright owning or selling equities

What You Will Learn

Options Trading Basics	Understanding options Differentiating between options styles Using options in challenging markets Option contracts Valuing options Options mechanics
Options Exchanges	U.S. options exchanges Option costs and benefits Option pricing factors
Option Risks and Rewards	Option trading risks Risk graphs Risk and reward profile
Market Swings	Macro factors Stock market bias Call and put activity Volatility as a proxy measure for fear Breadth and sentiment tools
Technical and Fundamental Analysis	Stock chart technicals Identifying strong sectors Sector volatility tools Projecting prices for trading
Practice Trading	Monitoring options greek changes Paper trading as a strategy Using trading systems Shifting from knowledge to mastery
Designing A Trading Plan	Developing a reliable plan Managing your costs Optimizing order execution
Types of Options	Index options Style risk Exercising American options Exercising European options Option obligations American-style index options
Protecting Your Portfolio with Options	Long stock protection Limiting short stock risk with calls Hedging your bets with options Avoiding adjusted options risk
Increasing Profit Potential, Decreasing Risk	Leveraging assets to reduce risk Combining options to reduce risk
Combination Strategies & Spreads	Combining options with stocks Vertical spreads
ETFs and Options	Exchange-traded Funds Reducing portfolio volatility with ETFs Sector ETFs
Making Money In Any Market	Limiting directional risk Neutral view vs neutral position Trading with delta Trade adjustments
Volatility Trading Opportunities	Implied volatility levels Understanding ratio spreads Using ratio backspreads
Trading Profitably In Sideways Markets	Winning positions in sideways markets Butterfly positions Condor positions
Ten Top Options Strategies	Married Put Collar Long put Trader LEAPS Call Investor Diagonal Spread Bear Call Credit Spread Straddle Call Ratio Backspread Put Ratio Backspread Long Put Butterfly
Ten Do’s & Don’ts Of Options Trading	Do focus on managing risk Don’t avoid losses Do trade with discipline Don’t expect to remove your emotions Do have a plan Do be patient Don’t suffer from analysis paralysis Do take responsibility for your results Don’t stop learning Do love the game

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3 – Understanding Options

If you are new to options trading and want a clear guide that is jam-packed with charts and strategies, Understanding Options 2E by Michael Sincere is a bestseller with good reason.

Sincere looks to help readers understand options trading basics, overcome anxiety associated with the obligations of options, and get comfortable with the Greeks – factors which affect options prices.

The basic strategies and more advanced options strategies are covered, plus the book is filled with helpful options tips.

So, whether you are learning for the first time about married puts, collar trades, and covered calls, or credit and debit spreads, straddles and strangles, Sincere walks you step-by-step through applying options with an eye on risk and reward.

What You Will Learn

What You Need To Know First	How to open an options account Characteristics of options
Selling Covered Calls	Writing covered calls How to choose the right covered call Step-by-step selling covered calls Managing your covered call position Assignment: your obligation to sell
How To Buy Calls	Introduction to call strategies How to choose the right call option Volatility and options pricing Step-by-step: buying calls Managing your call position Exercise: your right to buy
How To Buy Puts	How to choose the right put option Managing your put position Protective and married puts The collar trade
Intermediate and Advanced Strategies	Credit and debit spreads Buying straddles and strangles Selling cash-secured and naked puts Delta and other Greeks Trading options with ETFs, Indexes, Weeklys, and Mini-options Advanced strategies

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4 – Options Trading: The Bible

Options trading can be lucrative if you know what you’re doing. But how do you know what to do or how to get started trading so that you don’t lose money instead of making it?

Samuel Rees’ Options Trading: The BIBLE is a helpful resource that you can use to understand the stock market better and proceed with confidence as you make your first trades.

The author is regarded as an expert trader who has been where you are now. But before he became successful, he struggled financially for many years before beginning to study the stock market in depth with the aid of a mentor.

Once he mastered the stock market, he claims to have earned significant money from his investments and now passes his knowledge on to other investors who may be struggling financially.

Focus of This Book

The book focuses mostly on stock market basics. Investors who don’t know a lot about the stock market will find the crash course offered here helpful.

It also helps investors avoid making serious mistakes that can lose them money – many investors who have read it have commented that they wish they’d picked it up before they began investing.

Who This Book Is Right For?

This book is geared towards the beginning investor. Readers who are unfamiliar with the stock market and want to begin trading will find it valuable.

It’s also helpful for anyone who wants to learn more about stocks and options trading, regardless of how much experience you’ve had with the stock market already.

What You Will Learn

Some of what you’ll learn in this book includes:

Common lingo that traders use. You’ll learn vocabulary that is familiar to most expert traders and understand what common words mean in terms of whether or not to invest in a particular stock.
Mistakes to avoid. You’ll get an insider’s explanation of common mistakes traders make that cost them money and how to avoid them, as well as the faulty reasoning behind these mistakes.
Strategies for success. This book goes in depth about common trading strategies, explaining why these strategies work. There is also a step-by-step guide for making your first successful trades.
Understanding risks. The book goes into the risks you take when you get involved in options trading and how to understand, evaluate, and mitigate these risks.

What options trading books have you read that you would recommend? Let us know what the best options trading books are in your opinion, we would love to hear from you.

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George Windsor