Option Volatility & Pricing by Sheldon Natenberg
After obtaining a basic understand of stock and future options with “Options made Easy”, I was still interested in understanding the mathematics and strategies deployed by the traders. After reading the forums for recommendations I came across Option Volatility and Pricing by Natenberg and decided to give it a read.
In my point of view, the goal of this book is to give you the basic tools for you to develop a “feel” of the options market. The pricing of options depend on many factors and if you are not careful you can be burned unexpectedly in many different ways. The book seems honest in that it tells the reader that you cannot predict the future so there is no foolproof method of getting rich (with the exception of arbitrage, which if such an opportunity happened to exist in the market it would quickly vanish due to HFT).
Options are an enticing subject for people like me due to their mathematical and somewhat artful nature one needs to acquire in order to understand them. Rather than just buy and sell, a trader can take on many different positions with just the right characteristics and sensitivities as they desire. Though I am too risk averse to through a large amount of money into the markets, I am curious to learn more about this world, which I think is especially important since my retirement is in the hands of people who use these instruments.