Hi, I'm very new to option trading and I would like to learn as much as possible. Any and all advice is welcome.
There is only ONE rule - the $$ you allocate in that MUST BE disposable $$. Assume you lose it all (a good chance you will) and it won't hurt you a lot.
Yea just to add, start off with small amounts of money ok. I've been trading options for a while no when I start some new strategy I always use loose change. Glad I did caus I would av lost a lot than what I did.
Two pieces of advice. First, read as much as you can. I recommend: Options as a Strategic Investment - McMillan (I would start with this and Natenberg) Option Volatility and Pricing - Natenberg Options Trading: The Hidden Reality - Cottle (my all-time favorite) Option Market Making - Baird Volatility Trading - Sinclair Option Trading - Sinclair (another good book to start with) Dynamic Hedging - Taleb Options, Futures and Other Derivatives - Hull Second, fund a very small live account and start making trades as you learn about the strategies. You will learn a lot by watching how the positions behave in the market.
Many of those choices are (for the most part) irrelevant or going to bore the OP to death, or possible be over their head unless they are heavily interested in statistics or advanced mathematics/modelling.. OP: try "Rookies guide to options" by Mark Wolfinger. His website has posts going back to 2008 as well: mdwoptions.com Also check out free webinars at CBOE.com Paper trading comes *after* you understand how volatility affects price and what the heck time decay is doing to your call a week from expiration and can track everything on a P&L chart Good luck
I strongly disagree. The books I suggested are most definitely not irrelevant, although as I noted some are much more advanced than others. I would go so far as to say they are gold mines in my opinion, especially Natenberg, Cottle and Baird. The OP certainly would not be reading all those immediately or even in the first several months of trading options, but options trading is complex and in my opinion there is no substitute for some reading to lay a theoretical foundation, and for continued study as he becomes more experienced. Obviously there are other books and websites out there to learn from, many of which may be more basic than the ones I listed, but those books are my suggestions as they greatly helped me personally and I am confident OP could begin with McMillan and Natenberg and be off to an excellent start. Just my opinion of course, and OP can choose the course that is best for him.
Excellent list! Baird is an easier read and is high-level - it is all about one overall approach and risk. Cottle is mostly mechanics (which you do absolutely need) but is excruciatingly detailed (which is probably good for most newbies) and time-consuming. Some of the others are encyclopedic - you can judge by the number of pages - but you can pick chapters to read in some cases. This list is clearly oriented toward someone wanting a very thorough understanding. Lighter books, as suggested by the other poster, are fine too to start with, but realize that they may make things seem much easier and less risky than they really are.
Agree with noregrets. I don't know how old you are or how much time and effort you are willing to commit to your education but it takes a LOT of time and commitment to learn and many hours of hard lessons to understand options. I'm assuming you have the basics regarding stocks and a little understand of technical indicators and basic knowledge of the fundamentals as well. If you have successfully traded stocks/indices then you will most likely improve your success with the usage of options. Even if you decide to not trade options the education will help in evaluating stocks. I'd also start with McMillan but pick up the workbook and use it along with the text. Natenberg is essential and the others worth while. There are free video lessons I believe on the cboe website and if you sign up with thinkorswm they have tons of discussions/lessons and information which will help with your education. I believe most other brokers also offer some freebies. After your basic put and call, work on verticals then time spreads, understand the synthics (Cottle) and take the education with a small account where you trade 1 contract spreads until you have been thru a number of economic cycles and experience how volatility really works. If your money lasts you should be a fairly decent trader in 4-5 years. Good luck. .
Read, read, read, and then read some more. Think about it. And then, when you think you are ready- don't trade real money. Paper-trade for a few months. And only then- trade exactly the amount you are willing to lose as learning fees. If you are good at it, whithin 3 years or so you will be a good and profitable trader. GL