Top-7 Books on Options Trading - Basics & Advanced Strategies 2023
Updated: Aug 21
Anyone can generate some constant returns every month through options if they have an open mind to understand the basics of options.
Surprisingly most traders deploy only 'call buy' or 'put buy' strategies which have only 33.3% winning probabilities in trading.
I have seen many successful options traders who continuously generate profits with simple options strategies by taking the time decay (theta) parameter in their favor. The introduction of weekly options in Indian markets helped all these traders.
Let's walk through Top-6 books on options trading to explore the basics of options trading, options trading strategies, and techniques to deploy in 2021 markets.
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1 - The Options Playbook
Author – Brian Overby
Usually, many options trading books explain some options strategies at the surface level. However, this book provides an in-depth explanation of each strategy's options strategies and different perspectives.
This book starts with an overview of definitions and what types of options (calls/puts) are suitable for various kinds of traders. But it stands out with a detailed explanation of each strategy and which kind of trader should consider any strategy.
All the strategies are explained with large images which are easy to read and understand. In addition, there are many handmade notes; simple day-to-day examples are included to explain many strategies that help a novice understand the concepts better.
Usually, a payout diagram is mandatory to understand the various characteristics of an option strategy, and this book serves the purpose wonderfully well.
Besides, it also explains with apparent bullet points regarding trade setup, who should opt for it (beginners or experts), in which market conditions to run it (bull, bear, or sideways), and the possible outcome of a strategy.
The book's only drawback covers many strategies that demand significant capital. Otherwise, it is a beautiful book for every options trader!
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2 - Options Trading Crash Course
Author - Frank Richmond
This is a simple options guide for beginners. It is very short, simple, and precise, explaining some vital options strategies.
The exciting aspect of the book is that the author has made every important minute topic a separate chapter. For example, an individual chapter for 'Volatility,' 'Strike Price selection,' 'Time Value,' etc.
It starts with the basic concepts of options and explains why a trader should look to trade in options when they have the choice of trading in other instruments (equity and futures).
It breaks down everything an investor needs to know about options trading to generate some constant returns from their portfolio.
The only drawback is that it would have been a little longer. However, so many people like the narration and understand the concepts clearly; by the time they are eager to learn more, this book makes an ending.
But it is a definite one-time read book if you are a beginner, if you lack a basic understanding of options, or if you have not been convinced why a trader should try options trading.
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3 - Definitive Guide to Advanced Options Trading
Author – Rohit Katwal
Many options traders deploy only non-directional trading strategies, and they rely upon firefighting techniques to manage their positions if something goes wrong.
Firefighting is an excellent technique to manage and save our positions if the price moves in the opposite direction as compared to our original prediction.
But firefighting should be kept as a last resort for two reasons – 1) It brings a lot of emotions, and 2) A tiny mistake can wipe out the entire capital.
So it is always better to use some technical analysis concepts to decide the direction and magnitude of the underlying instrument to take the options trade (directional strategy).
In this book, the author has used many such technical concepts to decide the direction of the underlying instrument and along with some firefighting examples, making this book a lethal combo for Indian traders.
It is a must-read book if you are a trader based in India and interested to trade in options!
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4 - Options Trading for Dummies
Author – Joe Duarte
Undoubtedly it has been one of the popular books on options trading for many years. The new version of the book contains many new chapters to explain the recent dynamic behaviors of the market along with updated charts, statistics, and strategies.
It has well-organized content and explanation, even for a person with knowledge of technical analysis. It helps a person to pick the right strategy for him with the help of a description of the costs and benefits of each strategy.
The title may be confusing for some people. But it is a wonderful book if a person has a basic understanding of technical analysis.
However, it may not be suitable if a person is new to the stock market (in fact, options trading itself is not suitable for novice people).
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5 - The Option Trader's Hedge Fund
Author – Dennis A. Chen and Mark Sebastian
What will happen if a hedge fund manager and an options trading coach work together? The outcome is this beautiful book which shows how to earn a steady yet reliable income using options selling strategies.
This book is packed with many real-world examples to demonstrate how to create your own small hedge fund by applying the basic framework model of insurance companies. It is a feast for any trader who has the basic knowledge of options and wants to earn constant income.
It is the first book that addresses risk management issues for traders holding a portfolio of options.
The motto of the book is simple – if a trader is interested in constant income from options, then he needs to consider his options portfolio as a business.
Both authors are apparent with the concepts and demonstrate their knowledge throughout the book.
The only drawback of the book is its quality content. A beginner might face difficulties in understanding all the concepts. Otherwise, a must-read book for all the traders who love options!
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6 - Trading Option Greeks
Author – Dan Passarelli
Options Greeks include the different parameters which affect the options premium. For example, 'Delta' indicates the options' price sensitivity in relation to changes in the underlying instrument's price.
The author went deep inside all these Options Greeks and explained how to take advantage of these parameters in trading.
The slight drawback of the book is its selection of topics. Only experienced options traders like the content of the book. Beginners and intermediate-level traders might struggle to understand the essence of the book.
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7 - Option Chain Analysis
Author – Rajiv LB Roy
This book is specially written for beginners and intermediate-level traders. This book starts with the basic concepts of options but slowly brings up all the topics of option chains.
It explains in detail about Open Interest (OI) and how to co-relate OI with futures and options. Besides, it also provides a detailed explanation of how to use this OI data to predict the important support and resistance levels and how to define different strategies using them.
I hope you liked the above list of good books on options trading.
Did I miss any other good on options trading? If yes, please comment below.
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