Best technical options books as of 2018

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76132

I've read Cottle, Natenburg, Hull, but I'm still having trouble applying that knowledge into real life. Stuff I would like to learn more about are:

1) How does vol path interact with option values/skew/delta, etc...
2) Best methods to hedge when vol/spot are highly correlated
3) How to maximize gamma theta ratio

Bascially books on vol path, skew, etc...
 
Yeahhhhhhh, Good Luck with that.

(Which is to say, I don't know of one. I have tried a bunch, and been disappointed. The best I have found to do is just go for the math explications -- there are a few, but two authors who's books/papers I value are Ross and de Weert, and two subjects on which to google are Real Options and Mathematical Finance. Very solid stuff -- 9 books total in 2017-2018, between the two subjects and the two authors. Ross and dW themselves are 5 of the 9.)
 
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76132 said:
I've read Cottle, Natenburg, Hull, but I'm still having trouble applying that knowledge into real life. Stuff I would like to learn more about are:

1) How does vol path interact with option values/skew/delta, etc...
2) Best methods to hedge when vol/spot are highly correlated
3) How to maximize gamma theta ratio

Bascially books on vol path, skew, etc...
More...

I have a large number of options books in my bookshelf. I spend too much money stocking my bookshelf with books I only read a few chapters of.

You didn't indicate your mathematical sophistication. Since you're talking about greeks, skew, and what-not there's really no better books than:

1. 2.
EDIT: I can't seem to get the amazon links to show up...I linked Hull, and Wilmott.

If you understand these you can answer your questions directly.

I've read a number of decent books. What I've realized is everything I learned about theoretical option pricing is basically relegated to market makers. Maybe I'm doing it wrong, but I have yet to find any real "edge" in using theoretical models for discretionary trading. If you truly understand the books you've read you should have no problem answering the questions you are asking.
 
CME Observer said:
Euan Sinclair
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I would love for someone to justify him to me. I have Volatility Trading, and while it was a good introduction to cones and what-not, it was very light in execution. I didn't find the book very valuable. Could you sell it to me so I could justify another read through?
 
gaussian said:
I've read a number of decent books. What I've realized is everything I learned about theoretical option pricing is basically relegated to market makers. Maybe I'm doing it wrong, but I have yet to find any real "edge" in using theoretical models for discretionary trading.
More...
What you are saying: The options market is very efficient?
 
gaussian said:
I would love for someone to justify him to me. I have Volatility Trading, and while it was a good introduction to cones and what-not, it was very light in execution. I didn't find the book very valuable. Could you sell it to me so I could justify another read through?
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I think I’d had a hard time convincing you. My total readings in options:
1. Math of finance coursework (Hull)
2. Read a couple chapter of natenberg
3. Picked up “Option Trading”
It’s possible I’m giving Sinclair too much credit because prior to reading his book most of my “understanding” of options came from computing put call parity and pretending I understood Itos Lemma proofs in class. I would credit Sinclair with taking me from academic understandings of the Greeks to something a little more concrete, but you’ve exposed that I’m a bit behind on my options required reading so maybe we can safely disregard my opinion(:
 
ironchef said:
What you are saying: The options market is very efficient?
More...

The options market is very efficient thanks to very, very fast market makers using quantitative models described in the books I linked and their own custom models as well. Arbitrage for a retail is basically impossible due to a number of confounding factors including lack of DMA, capital, poor execution, and using "common" models.

I'm not claiming to be a professional options trader (I prefer futures), but in general the theoretical models and strategies are outside the realm of the retail trader. If I didn't have to know this information because of the classes I took I probably wouldn't go seek it myself. It's mathematically very satisfying and a very good exercise in willpower but I personally wouldn't put too much stock in the deep theory of options unless you're on a trade desk in an MM.

CME Observer said:
I think I’d had a hard time convincing you. My total readings in options:
1. Math of finance coursework (Hull)
2. Read a couple chapter of natenberg
3. Picked up “Option Trading”
It’s possible I’m giving Sinclair too much credit because prior to reading his book most of my “understanding” of options came from computing put call parity and pretending I understood Itos Lemma proofs in class. I would credit Sinclair with taking me from academic understandings of the Greeks to something a little more concrete, but you’ve exposed that I’m a bit behind on my options required reading so maybe we can safely disregard my opinion:)
More...

Sinclairs book did the same for me. I just didn't find as much value in his book in terms of actionable data. Glad to see I'm not alone in reaching for sinclair for the same reason.
 
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