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Option Volatility & Pricing: Advanced Trading Strategies and Techniques [Hardcover]

by Sheldon Natenberg
4.2 out of 5 stars  See all reviews (99 customer reviews)

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Book Description

August 1, 1994 155738486X 978-1557384867 Updated

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 trends in option products and trading strategies.


  • Pricing models
  • Volatility considerations
  • Basic and advanced trading strategies
  • Risk management techniques
  • And more!

Written in a clear, easy-to-understand fashion, Option Volatility & Pricing 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 explaining how this theory can be used to identify and exploit trading opportunities. Option Volatility & Pricing teaches you to use a wide variety of trading strategies and shows you how to select the strategy that best fits your view of market conditions and individual risk tolerance.

New sections include:

  • Expanded coverage of stock option
  • Strategies for stock index futures and options
  • A broader, more in-depth discussion volatility
  • Analysis of volatility skews
  • Intermarket spreading with options

Frequently Bought Together

Option Volatility & Pricing: Advanced Trading Strategies and Techniques + Options as a Strategic Investment + The Options Playbook, Expanded 2nd Edition: Featuring 40 strategies for bulls, bears, rookies, all-stars and everyone in between.
Price for all three: $117.64

Buy the selected items together

Editorial Reviews

About the Author

McGraw-Hill authors represent the leading experts in their fields and are dedicated to improving the lives, careers, and interests of readers worldwide

Product Details

  • Hardcover: 469 pages
  • Publisher: McGraw-Hill; Updated edition (August 1, 1994)
  • Language: English
  • ISBN-10: 155738486X
  • ISBN-13: 978-1557384867
  • Product Dimensions: 2.5 x 3.6 x 0.5 inches
  • Shipping Weight: 1.8 pounds (View shipping rates and policies)
  • Average Customer Review: 4.2 out of 5 stars  See all reviews (99 customer reviews)
  • Amazon Best Sellers Rank: #7,561 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews
285 of 296 people found the following review helpful
5.0 out of 5 stars The Classic, Essential Options Text June 4, 2000
By A Customer
I have been a professional options trader for over 11 years. In my experience most options traders fail, and for two reasons: naive faith in mathematical models and software, and a basic misunderstanding of the concept of impled volatility.
This is the one book that everyone who has worked for me has been required to read: it is ESSENTIAL. There is no other book that covers these topics in the the way that market practitioners think about them, nor does Natenberg forget to include anything that's really useful.
I have to agreed with another reviewer: understand and study this book! Options trading is a zero-sum game. Professional traders have the edge and been earning a good living from the ill-prepared, arrogant, and naive for years.
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117 of 121 people found the following review helpful
5.0 out of 5 stars Another book the CBOE should force all traders to read! January 13, 2001
If you trade options, you will quickly learn that it is essential to understand the concept of volatility. Natenberg explains the concept of volatility in great detail, and shows how this concept applies to different option positions.
Natenberg not only takes great pains to explain the concept of volatility, in addition to other inputs into an option pricing model, but clearly shows that option pricing isn't the exact science many seem to believe, for the simple reason that we never know if our volatility estimate is correct. I suspect many traders just don't understand the severe limitations current models have in different situations (ie. how the Black-Scholes model underprices options near expiration).
For the mathematically inclined, there are ample formulas and equations in the appendix.
Read it, study it, and apply the concepts to develop your own trading system.
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86 of 89 people found the following review helpful
5.0 out of 5 stars Great options book January 20, 2004
Perhaps the most amazing success story in the markets and investing in the last 10 or 15 years is the growth of the options market, and the advent of inexpensive trading for derivatives such as options, allowing even the small and amateur investor to use these vehicles if he or she wants. I've read that the options market has grown more than ten-fold since the 80s, even more so than the stock market. This book will help you advance your knowledge of this important area of the market.

This is one of the few really high-level options books that is understandable without advanced math. I have a couple of other books on options and derivatives, and they require advanced calculus. It's still geared toward the professional, but as an amateur I still found it interesting and worthwhile reading. Be advised you'll probably still need to read an introductory book or two on options before tackling this volume, which is what I did. But after absorbing those two books, I found I had the background to read and appreciate Natenberg's book. Natenberg discusses all the advanced concepts so you learn such things as how to do butterfly option spreads, synthetic puts and calls, volatility spreads, how to remain delta and gamma neutral, and other such advanced concepts. Overall a great book and essential reading for anyone who wants a better understanding of this important area.
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77 of 80 people found the following review helpful
5.0 out of 5 stars This book is absolutely awesome July 12, 2006
I hesitated writing a review for this book because I didn't want people to be drawn to it and therefore increase their understanding of options trading. However it looks like alot of other people already have written there review so I'll add my two cents worth.

The first time I read this book I didnt understand it and therefore I didnt like it. Fast forward a few years later with a wider understanding of options trading - I read the book again and was blown away by it. This is the best book written on options trading I have ever read. It explains more than just options strategies or the definition of different popular pricing models, it explains the basis of what goes into developing a theoritical option pricing model. It shows you the logic behind what every credible option pricing model attempts to do. I know now why I've been losing money. I've never read any other book that explains option pricing as simple and clearly as this book does and believe me, I've read alot of books. Other books I have read on option pricing are either too simplistic that many questions still linger or so complex that only someone with a heavy math background could understand it. Natenbergs book is just perfect. As I've implied earlier, you need to already have a solid knowledge of options terminology and mechanics but given that you have that, this book will take you to the next level. My hope is that most people would be too intimidated to read this book or a book like this so they never reach that next level. (Sounds mean, I know. Sorry!!!)

Most of all I like books that give me new ideas and make me think. This book does just that. I've never been the type to just trust in software or blind calculations.
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49 of 50 people found the following review helpful
5.0 out of 5 stars Great book for prospective traders August 10, 2000
With the popularity rise in options and option strategies, I must admit this is a great book to get started with. I am a clerk at the CBOE and have studied this book thoroughly, and in my experience it's the best options tutorial out there. I have also sampled the John Hull book and the official Options Institute book. The writing is very readable and it does not bog you down with overly complex derivations of each formula (there is an appendix that does derive and explain the details of the Black and Scholes model though.)
If you're serious about trading I highly recommend reading this book first - it'll be a useful tool. Working at CBOE I have seen many other clerks studying their Natenberg books during the slower times. Learning arb (hand signaling) and understanding what you are arbing are the keys for a successful options trader. This can be useful for someone just getting started in options as well or with prior experience.
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Most Recent Customer Reviews
5.0 out of 5 stars A must for derivatives trading
This a must read for intermediate-advanced options experts. I don't say "options traders" because you don't need to trade to understand the academics of options. Read more
Published 13 days ago by Jon
4.0 out of 5 stars Good book on options
Really good book with a lot of details and examples but its not for beginners (this should be your 3rd or 4th book on options).
Published 27 days ago by Sampath
5.0 out of 5 stars from basic to advanced, everything you need to know
Don't trade without reading this first, it's an essential guide towards understanding pricing, volatility, and dynamics between multiple market factors
Published 1 month ago by Daniel Rybin
5.0 out of 5 stars A complete exposition by a former MM, excellent
The book while written some twenty years ago originally is still a must-read. The author is truly blessed in being able to explain in detail all the pertinent concepts of Options... Read more
Published 2 months ago by Edgar Martinez
3.0 out of 5 stars Very Technical
I was able to learn alot more from my brokerage website tutorials, but it did come in handy referencing the strategy I'm most comfortable with.
Published 2 months ago by henry gutierrez
Was worth the read but the pearls are burried in too much extraneous detail taking an inordinate amoount of time for the benifit derived.
Published 2 months ago by Amazon Customer
4.0 out of 5 stars Its a great book but too complicated
I ve been hearing most option "guru" out there recommending this book as a start .
Yes if its the 90's but times have changed and prollly one should look for newer... Read more
Published 3 months ago by Vivan Raaj
1.0 out of 5 stars Skip this and buy Eun Sinclair's books instead
This is the single most banal volume ever written about options, and if it was not required for the CFA would have a hard time being taken seriously by Options market makers. Read more
Published 4 months ago by Bachelier
5.0 out of 5 stars Best Advanced Level book on Options trading
Best Options Book available

There are so many books claiming to be the greatest book on options and promise to teach readers with minmum risk trades. Read more
Published 4 months ago by fengshuienthu
5.0 out of 5 stars it has everything
I appreciate the level of detail, theory and application Natenberg provides. Just what I needed. I recommend it to any intermediate trader.
Published 5 months ago by bob bretz
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