Options trading is the most hands-on fun of any trading modality I have tried. There’s a fair bit to learn but once you get the main points you can keep your favourite books handy for reference.
The first thing you’ll notice is the language. When I initially became involved with Options trading I kept a journal. I found the terminology strange and sometimes the explanations didn’t make much sense. As I studied I began having a clearer understanding of the terms and recorded the definitions in my journal in my own language for future reference. When you’re facing a new language the last thing you need is ambiguous definitions.
Unlike investment trading, Options trading is a planned event. By this, I mean that the trade is planned from purchase to sale. Before you place your trade you will know which contracts to buy, how many to buy and why you’re buying them, and when you will be exiting the trade. All contracts are for a limited term with a clear, predetermined expiry date. If you think the market shares of the company underlying your options are going to drop, then the option contract you are buying is called a PUT..think “put down”. If you think those same shares are going to rise, then the option contract you are buying is called a CALL.. think “call up”.
It’s helpful to use your journal throughout the whole Options trading process. Each time I analysed a trade that I determined would be a good bet, I would diarize the whole analysis procedure. I’d note my reasons for my choices based on my analysis of the company. After consulting the CBOE I would note all the details of the contract purchase. This journal entry was my blueprint for the duration of the trade.
The balance of this page will be dedicated to my recommendations for software, books and guidance from the best experts out there to support your Options trading adventure. Learn the basics then get started. Losses can be minimized and controlled so don’t be afraid to get the kind of education that only experience can teach.
I’m always interested to know how you’re making out with your investing so please leave your comments below.
Thanks for visiting,
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“Writing Diary”: Image courtesy of Pong/FreeDigitalPhotos.net
“Plan Concept”: Image courtesy of renjith krishnan/FreeDigitalPhotos.net