Books to Learn Options Trading

There is no reason to spend tons of money to learn about options trading. Supposed options gurus will try to sell you high priced seminars in order to learn about all the different options strategies such as selling covered calls, selling puts, spreads, and butterflies to name just a few. Before you shell out big bucks, however, you should take advantage of many of the books written on the subject. I have had the opportunity to read many of these books in my decade of trading options and would suggest a few to get you started learning about options trading.

The first book that I would recommend is Getting Started in Options by Michael Thomsett. The author does a good job of explaining the basics of options and moving on to a few more advanced concepts. When learning about options, it is essential that you understand the vocabulary. There are really only two types of options, calls and puts. Depending upon how these two building blocks are combined with a stock position will determine what type of more sophisticated transaction you might have. It is also important to learn a little about the basic components of an option contract price, namely intrinsic and extrinsic value. Again, this book does a good job of explaining the basics.

Another book that I would recommend discusses covered calls in some depth. It is called Stocks for Options Trading by Harvey Friedentag. It is not very commonly seen in the bookstores that I visit, so it might take some effort to find it. Initially when I started trading options, I traded a lot of covered calls. This book was a great asset for me, and I have read it several times. The problem with covered calls is that they really offer little protection in the event of a down market and all of your good stocks will get called from you. I believe that options gurus who tout covered calls do a major disservice to investors. That being said, I think this book is good provided you understand that in my opinion, covered calls should only be used as a component of an options trading strategy that includes puts for protection from the downside. I am referring to the trade known as an equity collar.

Two other books that I would recommend are The Options Strategist by Marc Allaire and Options for the Beginner and Beyond by W. Edward Olmstead.  Both of these books are a little more advanced and more difficult reading than the first two I mentioned.  I would definitely not start with these two but do recommend them highly.

I have read two other books that are almost like college textbooks and take quite a while to wade through.  The reading can be very difficult and tedious.  I would only recommend these books if you are incredibly serious about learning options trading.  Option Volatility & Pricing is written by Sheldon Natenberg and can seem fairly theoretical at times.  The Options Course by George A. Fontanills is more practical but is over 500 pages so can take quite some time to get through.  I really should read it again sometime but still have other books that I have to read first.

Anyway, if you want to begin to learn about options trading, you should pick up one of the basic books about options which do a good job of introducing the terminology.  You might even find one at no cost at the local library.  There are also plenty of websites and articles that will help you learn about options.  So, instead of paying for a high-priced seminar, do a little of your own research and save your money for trading.