MDCigan

Any good books on options you may recommend?

Yeah, I'll make a comprehensive list later, but for starters, you want

1. Options as a Strategic Investment by McMillan
2. Naternberg's Option Pricing and Volatility (might have the title reversed, don't have it in front of me)

Those 2 lay out the foundation of theory and the various strategies

3. Harrison Roth's book on LEAP strategies is excellent

I've got a bunch more that deal with the nuts and bolts of actually putting trades on, adjusting trades, and what conditions you look for to use what strategy. A good one there is Option Traders Handbook by Budwick and Jabbour.

Ultimately, after many years I've sort of migrated to some core beliefs about how the individual retail investor can be successful with options:

1. Delta-neutral volatility trading really isn't effective for the small investor. Alot of seminar guys will try to sell you on this.

2. Rely on directional edge. In other words, use strategies with a specific directional bias. Of course, this assumes you have some methodology for having some edge in direction.

3. Stay away from being long short-term OTM options for directional plays unless you have very concrete reasons for expecting an explosive move quickly. Generally, use long-dated ITM options for directional plays so you get good movement with the stock price, and immunize yourself partially from time decay and implied volatility changes.

4. Be net long long-dated options and net short short-dated options. I got this concept from Baird's Option Market Making book. The optimal positioning is to be a seller of short-term options which have fast decay and be long long-dated options for big moves. Many people are attracted to being long short-term options because of the "lottery ticket" aspect.

All sorts of ways to implement this above. Calendar spreads, diagonal spreads, ratio spreads. I've concluded the single biggest edge one can obtain is to combine some directional accuracy with being a risk-conscious seller of short-dated time premium. Read Market Wizards, and read the interview with Tony Saliba who made millions in his 20s.

5. Most importantly, risk management is key. In my view, and my experience tells me so, on EVERY SINGLE OPTION TRADE you place, you should have some defined maximum loss where you would exit the trade.

I'll add some more books later.