Master profitable option trading with the techniques of the pros.
In The Little Book of Trading Options Like the Pros: Learn How to Become the House, a team of veteran options and derivatives traders delivers an expert account of how to master the zero-sum game of options trading. In the book you'll learn how to 'become the house,’ consistently making a small amount of money - on average - on each trade, in a similar fashion to a casino in Las Vegas or an insurance company selling insurance policies.
The authors explain how to skip the painful part of the steep options learning curve, showing you how to avoid the most common pitfalls, and become a profitable trader quickly. You'll find:
- A one-stop resource for everyone looking to become a pro-level trader, including a primer on options without fancy math, engaging anecdotes and lots of invaluable institutional knowledge
- A review of the full options ecosystem, and how to position yourself with the odds in your favor, to be a profitable player in this complex trading landscape
- A deep dive into the same strategies and techniques used by professional options traders, without the need for finance degrees or hard-to-obtain experience
- A clear roadmap of how to take the knowledge in the book and turn it into a practical and profitable trading endeavor
Perfect for inspiring day traders, The Little Book of Trading Options Like the Pros is also a must-read book for anyone interested in investing or trading in modern financial markets.
Table of Contents
Preface xi
Acknowledgments xvi
Chapter One Trading Options: Allure vs. Reality 1
The Retail Option Explosion 2
The Natural Biases of New Traders 7
The Amateur Trap 10
An Intuitive Conclusion 12
Chapter Two The Barebones Option Primer 15
Option Basics 17
Options in Time 20
Breaking Down the Option Premium 23
Combining Options 31
Real- World Examples 35
Chapter Three Become the House 39
The Broader Option Ecosystem 40
Our Core Trade 45
Strike Selection 47
Expiry Selection 51
Equity ETF Puts for the Win 55
Chapter Four Risk Management 57
Moving Beyond “Sell and Hold” 59
Stop Losses 60
Profit Taking 64
Rolling Positions 67
Chapter Five Building a Portfolio 73
Motivation 75
Expanding Our Universe 77
A “Commonsense” Portfolio 84
Optimized Portfolios 89
Setting Risk Exposures 96
Chapter Six From Theory to Practice 101
Option Screener 103
Trading 108
The First Six Months 119
Beware Assignment 122
Behavioral Biases of Sellers 123
Parting Words 125
Bibliography 127
