Recommended Reading 05-14-2014

Readers repeatedly ask me for book and article recommendations, especially new traders who are interested in learning more about trading and investing.  Education is the single most important prerequisite for trading success.  Here are two new book recommendations from my personal finance library. A complete list of all past recommendations is available on the Recommended Reading page.

Brian Johnson's Recommendation

Options as a Strategic Investment

by Lawrence G. McMillan

Options as a Strategic Investment is considered by many to be the single best book on options ever written.  It is a comprehensive work covering all aspects of options, option strategies, options trading, volatility, and many related topics.  Every option trader should own this reference book and refer to it often.

McMillan on Options

by Lawrence G. McMillan

McMillan on Options is a practical guide to implementing, managing, and trading actual option strategies.  Practical real-world trading examples are used to demonstrate pricing strategies, risk management, hedging, volatility trading, and McMillan's own personal option philosophy. This is an excellent companion to Options as a Strategic Investment.

Lawrence G. McMillan Amazon Biography

"Lawrence G. McMillan is the author of Options As a Strategic Investment, the best-selling work on stock and index options strategies, which has sold over 200,000 copies. The fourth edition of this work was released in March, 2002. In addition, he has written two other books, McMillan On Options (2nd edition, 2004) and Profit With Options and co-authored another, New Insights On Covered Call Writing. He currently authors a unique daily advisory service - Daily Volume Alerts - which selects short-term stock trades by looking for unusual increases in equity option volume. He also edits and publishes "The Option Strategist", a derivative products newsletter covering equity, index, and futures options, as well as "The Daily Strategist", covering much the same strategies but on a daily basis. In addition, he trades his own account actively, and he manages option-oriented accounts for certain individuals. In these capacities, he is the President of McMillan Analysis Corporation, which he founded in 1991.

Mr. McMillan is the recipient of the Sullivan Award for 2011, awarded by the Options Industry Council in recognition of his contributions to the Options Industry.

He has spoken on option strategies at many seminars and colloquiums in the United States, Canada, and Europe. He also writes frequently and is quoted in publications such as Barron's, Technical Analysis of Stocks and Commodities, Data Broadcasting's "Exchange" magazine, Futures Magazine, theStreet.com, and Active Trader Magazine.

Mr. McMillan received the prestigious Joseph W. Sullivan Award in 2011, recognition of outstanding contributions to the U.S. options industry.

Prior to founding his own firm, Mr. McMillan was a proprietary trader at two major brokerage firms. He began his Wall Street career as the retail option strategist at Thomson McKinnon Securities, Inc., from 1976 to 1980, and then traded the firm's proprietary account beginning in 1980. From 1982 to 1989, he was a Senior Vice President in charge of the Equity Arbitrage Department. Following that, he was in charge of the Proprietary Option Trading Department at Prudential-Bache Securities in 1989-90. In those positions, he traded the firm's own money - primarily in advanced option strategies and risk arbitrage at Thomson McKinnon, and primarily in convertible Euro-bonds and Japanese warrant arbitrage at Prudential.

He initially worked for Bell Telephone Laboratories in Whippany, NJ, from 1972 to 1976. He also published a weekly newsletter, entitled "Hedged Option Strategies" from 1974 to 1976.

Mr. McMillan holds a B.S. degree in mathematics from Purdue University (1968) and an M.S. in applied mathematics and computer science from the University of Colorado (1972)."

Conclusion

Options are complex instruments, which makes option education a prerequisite for successful option trading.  With the proper background, option strategies offer unparallelled opportunities for generating excess return and for managing risk.  Options as a Strategic Investment and McMillan on Options are two of the bestselling books on options, written by one of the leading practitioners in the field. I highly recommend both books.

Disclosure: Trading Insights, LLC has an affiliate referral relationship with Amazon.

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About Brian Johnson

I have been an investment professional for over 30 years. I worked as a fixed income portfolio manager, personally managing over $13 billion in assets for institutional clients. I was also the President of a financial consulting and software development firm, developing artificial intelligence based forecasting and risk management systems for institutional investment managers. I am now a full-time proprietary trader in options, futures, stocks, and ETFs using both algorithmic and discretionary trading strategies. In addition to my professional investment experience, I designed and taught courses in financial derivatives for both MBA and undergraduate business programs on a part-time basis for a number of years.
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