I am wanting to learn more about options for protection against a stock purchase...can anyone recommend a good educational read for me on this so I can learn more about the options market? Thanks for your help, sg
This is the Bible. Buy it. Keep it. Read it over and over. I do and I have been trading options professionally for six years.
Utterly and completely worthless. Natenberg. Baird. This exact same question has been asked time and time again. Try the search function.
I think being a rookie still myself, I can say that McMillan and Natenbergs books serve two completely different purposes. I read Natenberg first, and in hindsight should have read McMillan before that. Personally, I think that McMillan provides a solid foundation for each strategy, whereas IMO Natenberg dives deeper into the practical side of the BS model and managing risk. I think there's some helpful stuff at the end of McMillans book... and I think his book is sort of a pre-requisite for Natenberg's material. If one is well acquainted with option strategies and the basics, then McMillan's book isn't necessary IMO. But it's a great reference tool so far.
Option Volatility & Pricing: http://www.amazon.com/Option-Volati...=sr_1_1?ie=UTF8&s=books&qid=1271908665&sr=8-1 Options Trading: The Hidden Reality: http://www.amazon.com/Options-Tradi...=sr_1_1?ie=UTF8&s=books&qid=1271908700&sr=1-1 Volatility Trading: http://www.amazon.com/Volatility-Trading-CD-ROM-Wiley/dp/0470181990/ref=ntt_at_ep_dpi_1
Not a book, but here's how I would do it. Depending my time-frame (the time I'm planning to hold the stock), I would choose the expiration month or year, and depending on the price I want to hedge my loss in, I would choose the strike, accordingly. For instance, I'm long C at $3, I'm planning to hold it for a year, but afraid it's going to drop, I would buy 2.50 put options expiring on Jan '11.