Hull, Taleb, Natenberg - What order?

I have:
1. "Options, Futures and Other Derivatives", Hull
2. "Dynamic Hedging", Taleb
3. "Option Volatility & Pricing", Natenberg

Any suggestions on what order to tackle these books, or which one would be most useful for interview questions/early days on the job at a trading desk?

 
Best Response

I personally like Hull because it has review questions and work book to gain proficiency, but my favorite to gain "rule world desk practical knowledge" is Exotic Options Trading by De Weert. Read some of the chapters in Hull to get a better understanding of exactly how options and forwards are prices, then move on the De Weert to learn more about the greeks.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 

You would not get much out of 2 without having first read #3. It depends on what the desk is trading... if it is not options trading than 2 and 3 would both be pretty worthless. 1 would give you a broader exposure to things like futures and forwards; 3 would give you more practical options knowledge.

For options trading though, I would go 3 first, maybe 1, and save 2 for when you have a good grasp of options.

 

Natenberg's book is pretty easy to digest. Hull is the standard book; however, be aware that it is a hardcore book. Also, make sure you buy the US version if you go with Hull. I accidentally bought the Euro version and it screws up the math because EU options can only be exercised on expiration day versus US where you can exercise at any time.You really need to grasp the fundamentals and math behind options pricing before really being able to comprehend Hull's book. It is the book on options though.

Good luck!

 

I read Natenberg and then Hull and I felt completely prepared for full-time interviews for derivatives market making positions. Natenberg is a bit more practical for real-life events, but Hull digs much, much deeper into the theoretical background of the material.

 

I don't think Taleb is going to be awfully useful for anyone before they at least sit on a desk and see what is going on. A lot of the good bits from it are going to go over your head or not be fully understood otherwise.

Hull is basically a straight academic text on derivatives pricing. There isn't much else to it. Whoever said to not get the European version because of Euro options is a fucking moron. Seriously, what are you talking about? Have you read Hull to even understand what is going on? BSM is based on Euro-style options in the first place.

Natenberg is the best book for vanilla options, period.

 

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