The Moontower Quant Codex

Many beginners to options ask me and other professionals what they should read to learn options. I’ve seen this question asked enough times that I built a wiki that I can reference instead of needing to come up with an answer every time.

Voila…The Options Starter Pack (Link)

In the process of curating that I figured why not go the extra step…Introducing the Moontower Quant Codex (Link)

In addition to Moontower trading content, you will find select options content from the rest of the online vol community.

To maximize how useful this wiki there are a 2 important points.

  1. I will be keeping this wiki updated, but it is not open source. At this time, I think readers are best served knowing I’ve pre-screened submissions.
  2.  If you find a blog, book, video, interview, etc that you feel deserves to be here please submit it. I won’t guarantee I’ll include it but the benefit is we can keep this resource high quality and free of spam.

So there’s a tension involved…one side is that in order for this to be useful it can’t be a free-for-all. If you want a free-for-all there’s Reddit and Twitter and upvoting and ‘like’ buttons. This is not that. This is intended to be a reference with evergreen content subject to my standards. Like any manner of gatekeeping, I will miss things and I might let subpar stuff slide in. Sorry in advance. I’m always open to hearing suggestions/complaints. You’ll need to trust that I’m competent and care.

The other half of this tension is it requires engagement even though it’s not open-source. If you come across a source, a tool, a course or anything that fits neatly with this wiki then please share it.

Finally, here’s the excerpt from About This Wiki:
Option strategies range from directional hedging/speculation to the complexity of index dispersion portfolios and exotic structured product books. You cannot learn to trade options from reading. It is a craft and your understanding of it comes much faster when you have a position. When the feedback of the position comes in the form of mark-to-market p/l you learn what the position is sensitive to. Greeks like delta, gamma, and vega are immediately less abstract.

The good news is I believe any numerate, motivated person can learn options.

The bad news is two-fold:

  1. Experience is expensive.
  2. It is a craft best learned as an apprentice.

#1 is unavoidable. Straight talk — you will lose money learning. Guaranteed. Act accordingly. Don’t sell naked options and make sure worst-case scenarios are tolerable. Bid/asks are expensive. Sure, they might only be a few pennies, but 1 cent on a $1 option is 1% slippage. That’s 10-100x the slippage you pay to trade stock. Vast fortunes have been built on that 1% slippage. It will grind you as surely as a blackjack dealer if you play long enough without an edge.

#2 has better news. The internet in the form of blogs, podcasts, electronic brokerage and social media (esp Twitter) has never made it easier for a voracious learner to educate themselves, find mentors, and have meaningful discussions that would have been impossible even as recently as 2000 when I got into options trading.

I was fortunate to discover options trading right as I graduated college. I joined Susquehanna (SIG) and learned how to think about options, risk, and trading from Jedis. Their curriculum and methods for teaching were so comprehensive, tested, and systematized that it was a massive source of competitive advantage. The cared deeply about cultivating talent. They did not care if you knew what an option or interest rate was when they hired you. They looked for drive and aptitude only since they were secure in their ability to teach everything you needed to start managing a portfolio in as few as 18 months out of college.

I am not a math whiz. I was one of the <5% of hires who got a higher score on verbal than math SAT. Options intimidate many people simply because of the Greek letters and the math behind the models. I get it. I’m intimidated by math whizzes too. I have no more than HS Calc BC math education and a single stats course in undergrad. But the truth is, you don’t need to be able to derive Black-Scholes any more than billiards champ needs to know physics. Don’t get me wrong — the intuition behind the models is critical but the bar to acquire that is much lower than a math degree.

Much of my writing is an attempt to bring the reader to an intuition of the math in the same way that I was taught. I hope it’s even more accessible since my own weakness in math makes it easy to imagine being in the average reader’s shoes.

This wiki sits in that sparse space in-between the basics you might learn from the Series 7 and the nerdom that is derivatives structuring at a French bank. This is that mushy practical area in-between sophisticated retail and professional vanilla options user. It is an area, that will become more popular thanks to the boom in retail option activity and r/WSB. The vig and risk of options is going to weed out many of the new tourists but the few who persevere and have a deeper thirst to learn should find this wiki helpful.

And for the finance professionals who use options directionally but do not “trade volatility”, the resources found here might be just the bridge you need to understand volatility surfaces a bit better. This can improve your trade expressions, risk management, timing and ultimately executions.

If you have feedback, my door is always open.


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