what is a good book to read about valuating an option price?

Question

I am looking for a good book to be able to learn how to value a stock option, my main concern is how to find out if an option is too cheap or too expensive, I know the basics about options, I want to dig a little more in to pricing of options.

Thank you

Answer 1

Exchange-traded options are highly efficient (yet potentially very risky) and therefore it is extremely difficult to profit from an arbitrage situation or price inefficiency.

If you want free, comprehensive information on options go to the CBOE (Chicago Board Options Exchange) website, read about the risks and characteristics of standardized options if you have not yet done so, and they have online tools/tutorials/simulator online or via a free cd-rom package.

Answer 2

Not sure why the above poster didn't mention a book (which was your question), but some people have no comprehension.

One book in particular sticks out to me. It is known as the "Bible" for options traders/speculators. It is called, "Options as a Strategic Investment" by Larry McMillan. The most recent version is the 4th edition, published in 2002. It can presently be had on Amazon for $21.34 or half.com for $25. Personally, I purchased a like-new copy about 2 years ago for near $35 and have been happy ever since with the copy. Larry covers nearly every aspect of trading, pricing, etc on options: a true options expert.

Answer 3

I have studied almost all of the Option pricing models, Black and Scholes, Binomial etc;. They are very involved for beginners, though I am not discoraging you, you can read books by Rubenstin or Hull. Even basic financial books gives Black and Scholes.
If you want to get a simpler understandable one I have developed one which is available on google search 'Options Mathew Cherian'. If you like mine I will be happy to get a feedback.