Free Option Trading Books and Downloadable PDFs

Conversely, the higher the probability a contract could be profitable, the higher the premium. These tools are kept in perspective for aspiring and professional traders, explaining a straightforward and accessible style. A 5-day email course with amazing tips on trading, different trading instruments, and how to finalize a trading system.

– The Option Trader’s Hedge Fund

It explains in option chain analysis books 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. 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. 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.

“Option Volatility and Pricing” by Sheldon Natenberg

They say it provides great insight into how to find direction in the option chain. Readers also mention it’s a must-read for all aspiring traders, demystifying the option chain in simple language. Before understanding Option Chain, it is important to understand what Chain means. There are hundreds of technical indicators traders can utilize depending on their trading style and the type of security to be traded. Buyers are only willing to pay so much, and the seller is only willing to accept so much.

1. The strike price is the price at which you can buy (with a call) or sell (with a put).
2. Open interest is the number of options that exist for a stock and include options that were opened in days prior.
3. Given the time constraints, momentum indicators, which tend to identify overbought and oversold levels, are popular among options traders.

Option Chain Analysis: The CT Scan of Derivative Market EPUB

With options, the market price must cross over the strike price to be executable. For example, if a stock is currently trading at $30.00 per share and you buy a call option for $45, the option is not worth anything until the market price crosses above $45. When checking the IV across different strike prices and expiration dates, you might spot significant discrepancies—this could indicate mispriced options. A big difference between short-term and long-term IVs could also present opportunities for a calendar spread. Many options traders deploy only non-directional trading strategies, and they rely upon firefighting techniques to manage their positions if something goes wrong.

This book has long been read by options market professionals and has been called the “bible” by options traders. Understanding how market volatility relates to options pricing is key to helping traders evaluate fair values in the options market. Its 1,000-plus pages contain information on specific options strategies and market conditions in which they tend to work best. The book dives deep into using options as a hedge and explains how tax laws apply to option trading profits or losses. McMillan also offers detailed advice on trading index options, trading options on futures, and measuring market volatility.

In reality, the prices/premium which is being charged for any particular option is an amalgamation of various factors and information regarding the same can easily be accessed from the Options chain. Options contracts on the same stock with different expiry dates have different options symbols. This could signal institutional trading or upcoming news the market is trying to price in.

Remember, successful options trading isn’t just about finding prospects—it’s also about managing risk. Always consider the potential downside of any trade and how it fits into your overall financial strategy. It is an interesting book on options trading, which has been highly recommended by several traders worldwide who are new or even experienced in this field. It was known to be controversial since it was e-mailed to Wall Street and printed to the outer world. Neat and tidy charts and candlesticks have been regularly shown, making it interesting, especially for beginners, to understand the performance of the options. Few other caveats have been identified by the readers, such as making the charts more colorful or including some other strategies which could have made it more interesting.

Both authors are apparent with the concepts and demonstrate their knowledge throughout the book. Search Stocks Industry-wise, Export Data For Offline Analysis, Customizable Filters. In the image above, both call and put option data are highlighted on the screen. The data for the Call Option is put on the left-hand side and the data for the Put Option are put on the right side of the screen. Over the course of our discussion in this chapter, we will understand in detail what an Option chain is and how one goes about analysing it. Additionally, it holds pertinent new information on how accuracy in pricing can be a driving force of the profits earned.

And if you’re looking for even more knowledge, I offer coaching courses and have written hundreds of blog posts to tackle nearly every options trading topic there is, with more content published monthly. In addition, a higher IV suggests the market expects wider price swings, which could be the time to sell options if you believe the market is overestimating future volatility. For example, an option with a bid of $1.00 and an ask of $1.05 is more liquid than one with a bid of $1.00 and an ask of $1.20.