Option Volatility & Pricing: Advanced Trading Strategies and Techniques

by Sheldon Natenberg

BRAND NEW FIRST EDITION First Printing softcover, clean text, solid binding, NO remainders NOT ex-library slight shelfwear; WE SHIP FAST. 201509507 Carefully packed and quickly sent in rugged shipping box (or Priority Envelope). One of the most widely read books among active option traders around the world, Option Volatility & Pricing has been completely updated to reflect the most current developments and Option Volatility & Pricing has been completely updated to reflect the most current developments and trends in option products and trading strategies. It covers pricing models, volatility considerations, basic and advanced trading strategies, and risk management techniques. Written in clear, easy-to-understand fashion, the book points out the key concepts essential to successful trading. Drawing on his experience as a professional trader, author Sheldon Natenberg examines both the theory and reality of option trading. He presents the foundations of option theory, and shows how this theory can be used to identify and exploit trading opportunities. He explains a wide variety of trading strategies and shows how to select the strategy that best fits each trader's view of market conditions and individual risk tolerance. 3

Genres: Finance, Business, Nonfiction, Economics, Textbooks, Money, Technical

469 pages, Paperback

First published January 1, 1988

Reviews

[Austin · Rating 4 out of 5]

I have found that people in finance are prone to referring to books solely by their author (which would be a problem if anyone had yet managed to write two decent books in their career). When I began to learn about options, "Natenberg" was recommended to me more often than any other except for "Hull" (Options, Futures & Other Derivatives with Derivagem CD Value Package), which is of much greater breadth but less depth. Natenberg has very much become the industry standard starting point for teaching intuition for the behavior of options. Its strength and weakness are both wrapped up in the fact that it is exceptionally qualitative and easy to read. That is, it is accessible because it doesn't delve into some of the necessarily complex details of managing nonlinear risks on a full portfolio of options, but this is not its aim. What it does very well is to convey the intuition for how to think about the "Greeks" -- the mathematical derivatives of the option value with respect to various market factors. While written as an introduction to the subject, its target audience is the budding professional trader who will actually be trading volatility more often than market direction. I would recommend this as an excellent starting point to anyone who wants to understand options at a fairly sophisticated level. More detailed material will fall nicely into place with Natenberg as a background.

[Emily · Rating 3 out of 5]

This is a really hard book to read and understand. It covers a huge amount of fundamental options knowledge, but it does so quickly. I find it difficult to understand because very complex concepts are covered in a single sentence or two and then the author assumes you understand. It requires a lot of rereading and focus, but is worth the work if you're looking for a through understanding of options theory.

[Kaivalya Karkare · Rating 5 out of 5]

An amazingly well-crafted book that helps you build the perfect foundation in understanding and trading options. It starts from the basics of forward pricing, covers option basics, takes an in-depth look at the greeks & 2nd order risk metrics, explains volatility and the B-S-M Model very well, covers all the important options trading strategies, and ends with volatility skews and contracts. I have continually used this as a reference book while working with options trading over the last 1.5 years, and see myself using it for ready reference many years into the future. An absolute must-read for anyone looking to get into options trading full-time.

Deserves every one of the 5 stars!

[Grace Appler · Rating 5 out of 5]

The best options book I have read. Wish I read it earlier in my career. Feel I understand Black-Scholes for the first time.

Option traders job: find an edge, control risk; find an edge, control risk; find an edge, control risk ... goal is to realize and monetize the edge in all market scenarios.

Control risk: what do I do when market moves against me? What do I do when it moves in my favor? What do I do now to avoid future loss?

[Matthew Webber · Rating 5 out of 5]

Possibly the best resource to go from little/no understanding of options to an in-depth understanding of advanced Options Theory. Natenberg expertly breaks down complicated ideas into simple, easy to understand graphs with enough description to see why certain relationships exist, without being overwhelming. While the discussion of higher order Greeks could be more fleshed out, this book goes above and beyond in instilling an intuitive understanding of foundational options concepts in readers.

[Satish · Rating 4 out of 5]

This is not an easy read by any measure (at least for me) but don’t let that stop you from reading this book. I would urge you to read up on the basics of greeks (delta, gamma, theta, rho, vega) before you start reading this book, as that will give you some much needed background and understanding before you dive into complex analysis in this book. This book covers, basic strategies to advanced strategies and explains the concept of each one of those, and how they can be used in different scenarios with detailed diagrams. Additionally, it provides a couple of chapters dedicated to volatility, which is an important concept if you want to trade and understand markets in general.

[Isac Peredia · Rating 3 out of 5]

Very complex financial book, the financial vocabulary isn’t explained very well in the start of the book, without any prior finance knowledge this book would be a hard read, great book for wanting to start options trading

[Suyash Mallik · Rating 5 out of 5]

Read this for work. Great explanations, really gave clarity on things I'd been struggling to figure out by myself. A useful mental model for understanding complex things - suspend one moving part (just dont worry about it) and think about how the rest of the system behaves: you'll understand the need for that part precisely. Rinse and repeat, and now you have an intuitive understanding of how the entire complex system behaves!

[Fearless Leader · Rating 5 out of 5]

Classic

[Ben Cook · Rating 4 out of 5]

A huge tome which takes some serious time to wade through; however as a very in-depth introduction to pricing models it is really effective at getting across the key concepts; particularly IV which is an often overlooked metric in pricing of options.

[Fabio · Rating 4 out of 5]

3.5. Content is good, but too dense for the audiobook format.

[Andrew]

The book offers a solid primer—intuitive, and not excessively mathematical—on the theory underlying option pricing and trading. It could be reductively said that the book devotes many hundreds of pages to visualizing the various sensitivities of the partial differential equation described by Black and Scholes (aka the Greeks) to changing market conditions, and the remaining pages to addressing the epistemological concerns that (rightfully) ought to prevent blind faith in such models. On this latter point, I found the chapters "Volatility, Revisited" and "Models and the Real World" most helpful in describing the opportunities that arise from the systemic overuse of option pricing models.

[ScienceOfSuccess · Rating 3 out of 5]

It is not a bad book. BIt is clearly written for someone who is just starting with options.

[Chris · Rating 4 out of 5]

the strategies are not "Advanced", the mathematics is incorrect, but this is real, accurate information on options market making.

[Kevin Bray · Rating 3 out of 5]

There's no doubt in my mind that Sheldon Natenberg is of a level of intelligence that surpasses most. I'm leaving a 3-star rating not at all based on the content contained in this text, but based on his delivery of it. He says a lot by saying even more. The book could have been half as long and his message wouldn't have lost a single ounce of potency. That being said, if you truly want to learn the complexity and mathematical "geekery" of how equity, index, and futures options work, then I wholeheartedly recommend this book. Just be prepared that it's going to cost you quite a bit of mental bandwidth, a sizeable chunk of time and energy, and most likely an unhealthy amount of coffee while you're slogging through the minutia of options pricing.

[Oliver Price · Rating 5 out of 5]

Couldn’t have asked for a better introduction to options, with the book focussing on intuition rather than maths, which I often find is a sensible approach. This has left me feeling comfortable to explore the more mathematical side of pricing models.

The book covers the intuition behind volatility and underlying price distributions; practical aspects of incorporating delta, gamma, theta, and vega into trading (also touching on rho); scrutinises the assumptions of the Black-Scholes model and how this impacts decisions in options trading; and finishes with a discussion on skew and kurtosis, and how these feed into a volatility smile intuitively.

[Arda Canseven · Rating 4 out of 5]

A great book for understanding the higher-order greeks, why you shouldn't trade very short term short-strangles and how you make a profit by going long volatiliy & at the same time going short Theta. However, mathematically in order to comprehend options, it's not a good book since you have to dig into more real-time time series studies to understand that Black-Scholes has many shortcomings which are to be prone to be taken advantaged by many market-makers out there waiting for naive option traders.

[Mohamad Zeina · Rating 4 out of 5]

Great - takes you from almost no knowledge, to what feels like a good overall understanding of options trading, and includes some advanced strategies. I listened to the audio book - overall the adaptation is great, and allows you to get most of it without a PDF, but I think it could have made more use of the PDF. Ie some examples were hard to follow just using audio, and I had to repeat them several times, whereas if they were written down (optionally), they would have been much easier to follow.

[Samar · Rating 4 out of 5]

The risk management of options described here is an absolutely essential fundamental building block. It elevated my understanding of options and markets. But this is a trader book, not a quant book. It starts from the practical aspects and then tries to tie in the pricing theory. 

Being a novice, I don't think this book actually lacks depth. For plain options, it gives you almost everything. I do wish it contained more about structures or indexes, once it covers the spreads, it runs a little thin. Maybe it was a bit narrow around its subject area, still pretty good.

[Yury · Rating 3 out of 5]

Неплохая книга для систематизации основных знаний. Но имеет один большой недостаток, очень уж она давно написана - в начале 90-х. Многие современные тенденции затронуты весьма поверхностно, или даже просто вскользь упомянуты.
Список литературы, к которой идет отсылка тоже достаточно староват. Например много отсылок к статьям "Journal of Finance" конца 80-х, и порой даже 70-х годов...

[Pedro Branco · Rating 5 out of 5]

A must for any options trader. This book was presented to me about 20 years ago. It was a big dense at that time. But after some experience in options trading, I came back to it and it was much more valuable. Here you really understand why options trading is much more Volatility related than its asset price change...

[Ethan Lambert · Rating 4 out of 5]

I would say this is very good introduction for amateurs who have covered text books about options.
He explains most of the concepts intuitively thus making it easy for readers (specially those who are mathematically challenged) to understand the second & third order effects of options.
Those who have basic understanding of Options, Futures & Stats can skip the first few chapters.

[Andreas Andersen · Rating 5 out of 5]

Best book on investing with options on stocks I've read so far.
I heard it as an audiobook. The audio format worked well. The attached pdf with graphs of P&L and the like was enough to understand what was being described well. Many numbers were being read aloud, but not so much that it was distracting from the content.

I would not recommend buying or selling options before reading this book!

[Alex · Rating 4 out of 5]

Very solid introduction to the concepts behind stock market volatility and options pricing; that said, the book was more basic than I was expecting and much of the knowledge in this book I had already gathered from research online. That said, still learnt things and ultimately a good book to establish your fundamental knowledge of options.

[Manish Gupta · Rating 5 out of 5]

Absolutely brilliant. Option strategies and their risks explained in the most lucid manner. Once one is through with this book, options become much more easier and intuitive.

Must read for a serious derivative trader.

[Gabriel Moreno · Rating 5 out of 5]

This is a must read if you are trading options. Don't make it your first book on options but when you got the basics down and need to reach another level, this is your guide. Well written and easy to read.

[Major Hayden · Rating 5 out of 5]

I "read" this book cover to cover, but I had to go back and re-read plenty of it. I also love to use it as a reference when someone says "oh, charm has a high impact on the market right now" and I can go back to re-learn the concept.

[Will · Rating 4 out of 5]

a very (very) in depth book into the world and theoretical models behind options, futures, and derivative trading. A must read for anyone who is a master or student of the greeks and wants to go deeper into this exciting brach of applied mathematics.

[JaimedP · Rating 5 out of 5]

A thorough description on options for a newbie, however, it does not include proper strategies. The chapter about market making is very useful as this area of the market is kind of secretive even nowadays.

[Marc · Rating 5 out of 5]

My reference guide which I frequently revisit to find detailed information on strategies, theoretical models or other useful stuff. The book that strongly increased my knowledge on option trading. Not a book for novice traders.