Finance & Investment, Trading Options Takes Time And Patience


by TOM CROMLENTO - Date: 2008-07-13 - Word Count: 488 Share This!

Rather than jumping into trading real options, start by spending a few months trading options on paper. This is an excellent way to learn option trading, and although definitely not the same thing as using actual money, most experts will tell you that this is the best starting point for beginning option traders.

Once you finish tracking your trades on a piece of paper or with a spreadsheet, then the easiest way to gain more experience is to do trading option and should be on a small scale so you can build your confidence and work on your skill. If you look at buying options under $2 or so, one need not risk ample money at the start of your option tutorial.

If you are just beginning to learn option trading, it can be invaluable to choose a broker who will be able to help you with your orders. Selecting the correct broker is important, since with many discount brokers or online trading companies you must enter most or all of the orders yourself. While choosing to work through such a company may reduce your commission costs, thus boosting your overall returns, it may not be worth the price you may pay by forgoing expert assistance.

No matter which broker you select, do not let him convince you to have a "managed" options account. You should manage your own money if you plan on trading options. You should avoid putting every dime of your money into the options market all at once, however. Lots of traders grow impatient and sink all of their funds into "sure bets" that wind up wasting away and losing them all of their assets.

Prepare how to spread your purchases out over the next several weeks or months or even longer. Be certain to vary your expenditures amidst several positions and try to purchase calls as well as puts. The most relevant thing to understand with trading options is that put options make a profit when an index, stock or overall market becomes lower, and call options increase in worth when equity prices rise.

Most importantly, always practice patience and only play with money that you can safely afford to lose - your "Vegas" money, if you will. If you can't find a good trade with a solid risk-reward picture today, there will be more opportunities tomorrow.

Rather than jumping into trading real options, start by spending a few months trading options on paper. This is an excellent way to learn option trading, and although definitely not the same thing as using actual money, most experts will tell you that this is the best starting point for beginning option traders. After you have spent some time tracking your trades on paper at the beginning of your option tutorial, the least painful way to continue gaining experience is to start trading real options on a small scale until you build your confidence and skill.


Related Tags: finance, learn option trading, trading options, option tutorial

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