Option Volatility and Pricing: Advanced Trading Strategies and Techniques, 2nd Edition
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By: Sheldon Natenberg
WHAT EVERY OPTION TRADER NEEDS TO KNOW. THE ONE BOOK EVERY TRADER SHOULD OWN. The bestselling Option Volatility & Pricing has made Sheldon Natenberg a widely recognized authority in the option industry. At firms around the world, the text is often the first book that new professional traders are given to learn the trading strategies and risk management techniques required for success in option markets. Now, in this revised, updated, and expanded second edition, this thirty-year trading professional presents the most comprehensive guide to advanced trading strategies and techniques now in print. Covering a wide range of topics as diverse and exciting as the market itself, this text enables both new and experienced traders to delve in detail into the many aspects of option markets, including: The foundations of option theory Dynamic hedging Volatility and directional trading strategies Risk analysis Position management Stock index futures and options Volatility contracts Clear, concise, and comprehensive, the second edition of Option Volatility & Pricing is sure to be an important addition to every option trader's library--as invaluable as Natenberg's acclaimed seminars at the world's largest derivatives exchanges and trading firms. You'll learn how professional option traders approach the market, including the trading strategies and risk management techniques necessary for success. You'll gain a fuller understanding of how theoretical pricing models work. And, best of all, you'll learn how to apply the principles of option evaluation to create strategies that, given a trader's assessment of market conditions and trends, have the greatest chance of success. Option trading is both a science and an art. This book shows how to apply both to maximum effect.
AI Overview
Book Overview: "Option Volatility and Pricing: Advanced Trading Strategies and Techniques, 2nd Edition" by Sheldon Natenberg
Key Themes:
- Options Trading Fundamentals: The book provides a comprehensive understanding of options trading, covering both basic and advanced concepts. It delves into the intricacies of options pricing, volatility, and various trading strategies.
- Volatility: A central theme in the book is the analysis of volatility, including historical volatility, implied volatility, and volatility skew. Natenberg explains how these concepts influence option pricing and how traders can leverage this understanding for tactical advantages.
- Trading Strategies: The book extensively covers advanced trading strategies such as vertical, calendar, and diagonal spreads, along with simpler strategies like straddles and strangles. Each strategy is analyzed in terms of risk/reward profiles, optimal market conditions, and potential pitfalls.
- Risk Management: Natenberg provides advanced tips for managing risk, including building synthetic positions and finding arbitrage opportunities. He emphasizes the importance of understanding volatility to make informed trading decisions.
Plot Summary: The book is structured to bridge the gap between theoretical pricing models and real-world trading practices. It is designed to meet the needs of both beginners and advanced options traders. The text is filled with graphs and illustrations to better explain the complex mathematical concepts involved in options trading. Natenberg breaks down various trading strategies, providing data and statistics to support his approach. He also discusses how to trade on changes in market volatility and how to manage risk effectively.
Critical Reception: "Option Volatility and Pricing" is widely regarded as one of the most important books in the options trading industry. Reviewers praise Natenberg for his clear and comprehensive explanations of complex topics, making the book accessible to both beginners and experienced traders. The book is recommended for anyone serious about understanding volatility and options pricing, as it provides a solid foundation for advanced trading strategies and techniques.
Additional Resources: The book is often paired with a workbook, "Options Volatility and Pricing Workbook," which offers hands-on exercises to practice trading methods before entering the market. This combination provides a comprehensive learning package for investors looking to conquer the options market.