Options Books for Serious Traders

By Karim Rahemtulla. Investment Director, Mt. Vernon Research
Tuesday, May 17, 2005: Issue #209

Over the past few weeks, I’ve picked up a few new fun options books for serious traders. And believe it or not, I actually want to tell you about them!

My longtime readers may know I am generally loathe to recommend any options books because, frankly, they tend to be boring. But since options are getting more popular, there are more books written in an exciting and engaging fashion making their way to the market.

The selection I purchased ran the gamut from elementary to advanced.

Here are the best ideas from the best options books I’ve read lately… and that you might want to make part of your trading library…

A Great Options Book for Beginners

If you are looking for a starter book on options, I would recommend – please don’t be offended – A Complete Idiot’s Guide to Options and Futures, by Scott Barrie.

This book is written in a fun style and goes over options basics as well as an explanation of strategies.

Scott was a former trader and now runs an educational service targeted at new options investors. He’s particularly adept when it comes to putting the strategies out there in plain English.

And I think his take on how to calculate returns in an understandable fashion was dead-on. Scott makes a good point about bull-spread trades… And that is: You must understand the concept of “net debit” in order to know how much you’re really making with each trade.

Here’s the secret, as Scott reveals: When you sell an option against another option, the result of that sale is money back into your account and a reduced basis for calculating returns at expiration. That’s hedging power at work, and it’s one of the things that make options worth trading…

If You Want to Trade Online, Read This…

The second book I really loved is by George Fontanills… It’s called Trade Options On-line.

Fontanills is the man behind Optionetics, a well-known options group that spends a lot of time and money on advertising its prowess. (I have seen some infomercials very late at night about his products.)

Fontanills’ book is an interesting read and contains some valuable information and advice… the best of which is: Don’t let yourself be trapped into one type of options trading.

There are myriad options strategies available to the “ordinary” investor, and I agree with Fontanills that you should keep your options open (no pun intended) when it comes to options strategies.

While brokers might want to keep you SOLELY focused on covered calls, for example, Fontanills reminds us that there are countless ways to profit from options: vertical spreads, covered calls, bull spreads, bear spreads, you name it. Fontanills also explains each in a very clear and concise manner. And I highly recommend his book.

Options Books: Getting Better as the Market Grows

These two books just go to show you that the options world is expanding. No longer do traders have to rely on boring, stodgy or plain wrong-headed books that are best used as paperweights.

They represent a nice leap forward from the options tomes of old…

Still, what I would love to see is more books from experienced options traders, real information coupled with real-life experiences – kind of what you get from Investment U for free.

Good trading,

Karim Rahemtulla

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