One of the questions I get from my option mentoring students is “What are the best books to learn options trading?” It’s a good question as there are about 1,000,000 books out there all claiming to be the best option books. The truth is, for every great options book there are about 9 or 10 that are total pieces of junk. So I thought today, I might write up my reading list. This list is how I would progress through the process of becoming a somewhat advanced option trader:
Category 1: The Starter
Options for Rookies by Mark D. Wolfinger: Yes he is a little irritable sometimes, but in the end the man cares about people. He wants to help new traders, and he wrote a pretty good beginner book. There are other decent rookie’s books out there as well; the Thomsett book is good as is Options for the Stock Investor by Jim Bittman. However I want to pick one, and Mark Wolfinger’s is my choice.
Category 2: Getting Ready to Start Paper Trading
Trading Options as a Professional by Jim Bittman: more mathy than a beginner book, less mathy than an advanced book, but in the end beautifully written, highly educational and one fine book. I have yet to find an intermediate level book that is as high quality as this one. He did a masterful job. One other book that I like in this class is Options Volatility Trading by Adam Warner. This is probably one of the hardest areas to write in and both of these authors do it well.
Category 3: Ready to Trade
Option Volatility and Pricing by Sheldon Natenberg: considered by most professionals to be the bible of the industry, this is the best written upper level intermediate book available in the market place. This should be on every trader’s shelf and is the closest thing to a ‘text book’ that is actually NOT a text book. The other great book is Larry McMillan’s Options as a Strategic Investment. Bigger and more comprehensive than Shelly’s book it is a tougher read and less contiguous as well. This is more of a reference book than any other book out there. If traders only buy 1 book I would make it one of these (although I would get both).
Category 4: Advanced and Mathy
Dynamic Hedging by Nassim Taleb: His first book was his best: much more nuts and bolts, and less preachy than his later books. If you are looking to really understand advanced concepts of volatility this is the source to learn that knowledge. To get any deeper means you are reading a text book. I would also suggest Jeff Augen’s The Option Trader’s Work Book at this level. It will help traders know that they can apply all that they have learned.
Category 5: Continuing Education
Trading VIX derivatives by Russell Rhoads, if you haven’t read this book it is time to change that. Volatility as an asset class is here to stay; traders that don’t read this are missing out. Anything by Jeff Augen is worth a read; Charles Cottles latest book has tremendous value as well. When my book comes out next year, it will also fit into this category. Traders can start reading these once they have read through McMillan or Natenberg.
You can read more of Mark’s thoughts on the Option Pit Option Mentoring Blog