Learning to Trade Options
by aati | July 12, 2012 2:40 pm
I want to learn to trade options[1]. I have heard a lot of negative stuff about trading options, is the effort in learning to trade options worth it. Or should I stay away from options.
Found this website for learning about options, anyone has any opinions on this guy:
http://www.learn-stock-options-trading.com/explain-option-trading.html[2]
Thanks.
Endnotes:
- options: https://www.stockgumshoe.com/tag/options/
- http://www.learn-stock-options-trading.com/explain-option-trading.html: http://www.learn-stock-options-trading.com/explain-option-trading.html
Source URL: https://www.stockgumshoe.com/2012/07/microblog-learning-to-trade-options/
I’ve realized meaningful gains using LEAPs (options with a multi year expiry) as a proxy for the underlying as explained in Lee Lowell’s rather dubiously titled Get Rich with Options ISBN-13: 978-0470445891. It’s a good book despite the silly name.
Combining his option strategies with purchase decisions driven by “old school” fundamental analysis (big fan of Graham & Dodd, Phil Town) of the businesses I invest in has worked very well for me.
James B, Thanks for your recommendations I will look into the book you have recommended for options.
I have gone through some of the training modules and lessons from the website I had posted earlier (learn-stock-options-trading.com), but his lessons are peppered with very redundant language and info, as he keeps saying “trust me if I can do this, anyone can” and “once you understand options you can fire your boss” and “people make options more complicated than they really are” and more blah blah blah.
Then, while looking for info on options here at Stock Gum Shoe, thanks to Travis I stumbled upon CBOE. So I registered for online courses at CBOE and so far I like their format, method of delivery and straight to the point language.
Here’s the link to the Chicago Board Options Exchange education and learning section, http://www.cboe.com/LearnCenter/Default.aspx
With options, I would suggest that you look at the profit loss graphs of various strategy as I found it really useful to understand the risk & reward associated with each strategy . Sometimes they turn out the exact opposite of what you would expect. There a lot of tools out there which would create the graph for you. I use thinkorswim to paper trade and learn. Another free resource are webcast by brokers, I know most big ones have some. You don’t need to pay.
Options – ah yes my favorite subject. I started trading options atively in the mid 1980’s and I must say that I have made more money trading options than with any other investment vehicle. It is all about leverage. Believe it or not there are ways to use options with very little risk. For example, if you own an optionable stock, you should almost always write “covered calls” against that stock. This carries very low risk and will add to your profitability of that stock. The pricing of options is always based on volatility and the volatility of the market can always be checked by accessing symbol VIX. Actually, I believe one of the most profitable option trades is selling naked puts. It is relatively safe and the profits are very good. Enough said for now. You are doing the right thing by studying option trading first before investing and I might say that there is enough information out there for free so don’t waste money buying what is available for FREE.