Stock Option Trading?

[Justin Case]

Has anyone had success trading stock options?
If so how did you learn?
Books? Any recommendations on what ones?

[Vikram C.]

I agree with Niman. It is important to have a good theoretical understanding of options in order to successfully use them in the long run. And when you study the Black Scholes model, make sure you learn about the assumptions underlying it. IMHO, the model undervalues long duration options.

One other important thing to understand when dealing with the financial markets is the types of errors in thinking that are common to our species. The field that studies this is called Behavioral Finance or Behavioral Economics. Learning a little bit about errors such as anchoring, recency bias, the assymmetry between our reactions to profits and losses, etc. allows you to exploit them for higher returns. If you want a simple book to read that talks about some of these errors, you could buy "Fooled by Randomness" by Nassim Taleb, who also wrote the harder-to-read Black Swan.

I think learning the techniques of options trading without learning the underlying economics of it is very dangerous.