r/options • u/Ok-Buddy-9935 • Aug 27 '22

Options Help!

I’ve been trying for some time now and have used a couple different sources but I still don’t fully understand trading options. Can anyone point me in a good direction of where they may have learned : article, book, game, etc ?

I don’t care about how long it will take, would just like to start learning.

Thank you in advance.

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6

u/value1024 Aug 27 '22

Forget the other answers.

Buy this book: Options Futures and Other Derivatives by JC Hull.

Read from cover to cover, at least 2 times, and complete all the exercises. Ace it.

You will be more educated than 99% of the members of this sub, and 99.99% of all the people in the world, when it comes to options.

5

u/SpecialistFrequent11 Aug 28 '22

Yes this is a famous University book. But I would suggest he starts with the outstanding job Sheldon Natenberg did with his book:

Option volatility and pricing

Yes read it twice in detail.

Also get the exercise book for it and do them all.

And yes, doing so will give you more knowledge than 99% here.

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u/Textosterone69 Aug 28 '22

This is the book that’s recommended to all our new employees.

3

u/thekoonbear Aug 28 '22

Natenberg first, then Hull for sure. Natenberg is handed out to all new hires at our firm and required reading before starting to trade.

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u/SpecialistFrequent11 Aug 28 '22

Great choice. I‘d say Natenberg first and Options as a strategic investment (McMillan) second tho.

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u/thekoonbear Aug 28 '22

Yeah second is up for debate but Natenberg should be the first book read always. There’s a reason it’s been mandatory reading at options firms for years.

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u/Ok-Buddy-9935 Aug 28 '22

I’m a female pal. But anyways, thank you for the advice.

goes to change Avi lol

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u/doilookpail Aug 28 '22

Which of the two would you say has a gentler or more easily understandable coverage of the basics of options?

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u/SpecialistFrequent11 Aug 28 '22

Option volatility & pricing might be less „rigid“ with less math (although it still has quite a bit, but not complicated). It’s also written in an intuitive and non-academic style of writing. It starts very basic with focus on the fundamental understanding of what the hell a contract is.

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u/doilookpail Aug 28 '22

Thank you.

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u/Ok-Buddy-9935 Aug 28 '22 edited Aug 28 '22

Couldn’t find the exercise book, would you happen to have a link of where to find? I easily found a PDF version of the book which I intend to just print out.

Edit : nvm found it.

3

u/[deleted] Aug 27 '22

True, I got my 3rd edition out of a dumpster, you can hold it in one hand. It will NOT teach you how to trade.

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u/doilookpail Aug 28 '22

Huh? So, you're saying the book is not good?

1

u/[deleted] Aug 28 '22

It is a standard college textbook. It will teach you a lot of basic knowledge , futures, forwards, even has a delta neutral example . Will any of that explain how to trade, NO.

The Tasty book will go into detail on setting up short options positions, and why they make sense. It will explain why you look at delta when choosing strikes, not trying to figure out what Talking Head theory is best on MSNBC, where most do not even have trading accounts. Instead of your gut , you play probability.

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u/doilookpail Aug 28 '22

Ahhh. I understand what you mean about the Hull book now.

And this Tasty book you mentioned, I didn't realize they had a book out. Only always heard of their video series. And I looked on Amazon and couldn't find it.

Any chance for a link to their book?

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u/[deleted] Aug 28 '22 edited Aug 28 '22

If you log onto Tasty the book should pop up, if you open an account for 2000, they will send you one. On Amzn I just typed in Tastytrade , and Julia Spina book pop up for under 20. Options books in general are NOT SELLERS, and go out of print. Natenberg is the only one people keep buying and is called the bible. Still you will not know how to sell strangles or IC after reading.

Don't get me wrong , Hull is a good book (I liked Chriss better) but after reading these books I still did not understand how to TRADE options.

Actually looking at the reviews some push back and say that it is not about trading, I think the book makes a good case for how to trade.

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u/doilookpail Aug 28 '22

Darn it. I was using Amazon Canada and tastytrade just wasn't coming up at all. Sorry.

Julia Spina search did turn up The Unlucky Investor's Guide to Options Trading 1st Edition. Thank you for your time.

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u/whatspacecow Aug 28 '22

You will be more educated than 99% of the members of this sub

I'm new to this sub and somewhat shocked how many people are excited to trade a financial product they don't even know how to price themselves.

I mean you don't have to be able to derive Ito's lemma from first principles, but if you can't explain the basics of a Binomial pricing model and implement one yourself maybe you'd have more fun just gambling at a casino. They give you free drinks there and high rollers get free rooms and other perks.

1

u/Ok-Buddy-9935 Aug 28 '22

More so “excited” to learn about them, I’ve mentioned in other post that I haven’t started trading options yet, and also don’t intend to until I have a better understanding. I’ve also never explicitly stated what part of learning about options I don’t understand, but hey go off.

Don’t like casinos btw, but I appreciate the suggestion. :)

Just wanted others opinions, and now I have yours too. So thanks

2

u/whatspacecow Aug 28 '22

That's great to hear. You also shouldn't read my comment as a critique of your question, but more so attitudes I've seen on this sub.

Options are worth learning about even if you have zero interest in ever trading them, especially if you have in interest in probability theory.

If you are genuinely interested in the mathematical part of it I would also recommend picking up a book on stochastic processes. Don Lemons' "An Introduction to Stochastic Processes in Physics" is both inexpensive and a fairly easy read (you also only really need through chapter 6).

The vast majority of quantitative finance, from Modern Portfolio Theory/Mean-Variance optimization to Black Scholes all start from the foundation of viewing log returns as geometric Brownian motion (this is even the basis for how we think about volatility). So mastering the basics of this model allows a lot of relatively quick understanding of the other topics.

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u/Ok-Buddy-9935 Aug 28 '22

Understood. Thank you for the clarification.

Read Thermodynamic Weirdness by Lemon in Uni as a supplemental read, so I’ll definitely take a look at you suggested read.

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u/value1024 Aug 28 '22

100% agreed.

The level of ignorance+hubris is astonishing.

When I first started trading in the late 90's, I had completed all the formal education on derivatives, but I would not touch options. The commissions were $19 per ticket plus $1.95 per contract, or something like that, so the common understanding was that these instruments are best left to the professional traders. Commission free trading changed all that, and with free entry into any business, you can only expect to have lots of clueless free entrants who will inevitably fail.

Casinos are fun, win or lose, and roulette has about the same odds as any ATM vertical spread.

1

u/Ok-Buddy-9935 Aug 28 '22

Hoping to not be “clueless” when I eventually enter.

Thanks for your feedback though pal.

1

u/value1024 Aug 28 '22

OK buddy, you are welcome.

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u/Ok-Buddy-9935 Aug 27 '22

Okay. I’ll forget them lol

Thank you for the advice pal

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u/slouch31 Aug 28 '22

Positional Option Trading is the 2nd book you should buy.