Option Volatility Amp Pricing Advanced Trading Strategies And Techniques Sheldon — Natenberg

In the pantheon of financial literature, there are introductory guides and there are career-defining bibles. For the professional options trader, Sheldon Natenberg’s Option Volatility & Pricing: Advanced Trading Strategies and Techniques sits firmly in the latter category.

Sheldon Natenberg did not invent options. But in Option Volatility & Pricing: Advanced Trading Strategies and Techniques , he created the definitive operating manual for the professional volatility trader. In the pantheon of financial literature, there are

Chapters 16-20 (Position analysis, spreads, and ratios). Master the "Option Pricing and Risk" charts in the appendix. But in Option Volatility & Pricing: Advanced Trading

That shift in perspective is the difference between the gambler and the house. That shift in perspective is the difference between

The book provides the most lucid explanation of the distinction between these two metrics:

Instead of buying a straight call, you buy 1 call and sell 2 higher-strike calls. This caps your upside but lowers your cost to zero. Natenberg’s insight: This is a volatility trade , not a direction trade. You profit if the stock moves exactly to the short strike, and volatility crushes.

Natenberg introduces the concept of —the market's collective guess about future movement. The book teaches you that the price of an option is irrelevant; the implied volatility of that option is the only truth.