Option trading?
Hello everyone. I have been buying stocks for my portfolio for about 3 years now. However, for the past year or so, I’ve been hearing a lot about Options. Are Options for short term traders or long terms traders. Also, is there validity to all the hype? Would it be worthwhile to learn about it or should I just stay with stocks? I would appreciate info from anyone who has extensive knowledge. Thanks
Options can be played for short -term [days], intermediate [weeks] to long-term [months].
I tend to be in the trade or position for a couple days to a few weeks.
You can trade longer term options, which are known as LEAPS [Long-term anticipated participation], but they usually cannot be bought for any longer than 2 years. Options expire or run out of time..
When folks don’t know what they are doing or how to do things, they are just taking potshots.
Options give a trader leverage or "more bang for the buck".
To learn more about the world of Options, here’s a free site, which virtually "spoon-feeds" traders about options:
http://optionseducation.org
Thanks for asking your Q! I enjoyed answering it!
VTY,
Ron Berue
Yes, that is my real last name!
what is the best trading system for on-line stock and option trading?
There are may different systems for trading on line. Some are Dynamic Trend, Teach Me To Trade, etc…
I have been trading online for the past six years, and learned a number of different trading systems, and I can tell you there are no perfect system for everybody in all conditions. To complicate the matter further, you can choose different security types such as bonds, mutual funds, stocks, options, FOREX, etc. The choice of a trading system for your own situation will depend on:
- The amount of capital you have: you will be more conservative the less you have so you don’t loose it all in a few trades.
- Your tolerance to risk: what is the worst single loss you are able to tolerate in a single trade? What about losses in a week or month?
- The time you are willing and able to dedicate to trading everyday: For active trading, you should dedicate at least 30 minutes a day, with a few additional hours for stock screening and administration of your account.
- How much you control your emotions (fear and greed): this is one of the biggest danger of trading, what will make you fail to follow your own trading systems. Watch-out for that.
The key for most people is to keep track of the trades you have done, along with information for each trade of what system you are using to buy and sell. After a trade, rate yourself on how much you have been able to actually follow the system you chose in the first place when you placed the trades.
First, take a course or read books and learn a trading system. Make sure your system includes portfolio management and trade risk management. Check here for a few references: http://online-investing-review.com/blog/online-stock-trading/
Before investing real money, use virtual trading where you invest with fake money using exactly the same tools as if it were real money. This will save you thousands in avoiding real losses. When you trade virtual money, be as careful as if it were real money and be consistent. Make sure you track all of these virtual trades in your trading journal. See here for an excellent and free virtual trading environment: http://vse.marketwatch.com/Game/Homepage.aspx
Looking back weekly and after a few months, review your trading journal:
- Are there some trading systems that you had trouble following? If yes, they may be bad trading system for you.
- Among the trading system you were able to follow well, what is the average return?
- Since trading systems work differently on stocks, mutual funds or options, keep track of these and see what type of security worked best with specific trading systems.
In conclusion, you have to invest time and money to learn and try trading systems methodically to find the best system for you personality and your personal situation. Keeping accurate record of your trades and results will allow you to make an objective decisions and adjust your trading style to maximize your profits.
Which is the best broker for online stock trading for starters?
I want to invest in stocks, trading and option trading, but i’m now starting out and have no, or little experience. I would like to know which broker I should join to do online transactions. Thank you.
I like Scottrade. $7 market orders, fast executions, good customer service when I need it, which hasnt been often. Their website provides a lot of good research information.
stock option trading questions?
first off if you buy a stock option and the intrinsic value goes up to 2…. profit if u exercise is 200$.
Do you need the money to actually purchase the 100 stocks or do you sell an option that you bought cause it has increased value???
Over 90% of options never get exercised.
Your profit will likely be more than $200 if there is still time premium remaining.
People buy and sell options to make money, most do not care two bits about owning the underlying. Just sell-to-close the call, get the cash and do it again!
PS.. the one thing you might want to pay attention to is DIVIDENDS. If the underlying’s ex-div date is coming up and you want the dividend, you might want to exercise your call option to earn the dividend.
Hope this helps!
Option Trading?
In the stock market what does option trading mean?
I am using sharebuilder.com and has that its $15.95 + $1 fro each contract. What exactly does that mean.
Thanks. 
Options are contracts to buy or sell 100 shares of the underlying stock for a set price up to a set date.
Investors buy or sell these contracts based on what they think the underlying stock will do. It is a way to leverage or insure you investments.
If you want to trade go with a brokerage geared towards option trading. I use Trade King which charges $4.95 + $.65 per contract. Commissions can be a big cost on options trading, so look for a better deal.
I have a blog on options trading: http://coveredcall.wordpress.com/
If i want to do option trading,In how many equity asserts i can do option trading…?
I want to know the list in whhich option trading is allowed……(on stocks present in equity market) and what are they…………
As of today there are 2,502 equities with options listed in the CBOE equity option symbol directory.
http://www.cboe.com/TradTool/Symbols/SymbolEquity.aspx
There are a few equities that have listed options that are not traded on the CBOE which are not included in that directory.
If you are a big enough player you can trade FLEX and/or OTC options on any equity.
Can you make a living out of Options-Trading / Stock-Trading?
If yes, Then why do all these trading coaching programs keep bugging you to buy their product? If these coaches can make money by trading, why bother selling it to people?
you’re right, the people who have to go out of their way to market it to you, are most likely not making money IN the market, more likely they’re making money "off" the market, prettymuch just selling some kind of "winning strategy" or they have "secret tools" etc etc.
But I have a family member who has a fairly large account, and trades successfully, but still works a regular job. In order to sit at home and trade for a living, it would take 5-10 years of experience before you could even considering quitting your day job and you need a good amount of money.
So yes, it can be done but it’s something you’d want to do that much, plus the best stocks out there only present buying opportunities every now and again, ya know there isn’t always great stocks to buy all the time… there’s an old wall street saying that goes something like this:
"There is the plain fool, who does the wrong thing at all times everywhere, but then there is the Wall Street fool, who thinks he must trade all the time" -Jesse Livermore, one of the most widely regarded investors that ever lived!
WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS? Thanks…?
I UNDERSTAND THERE IS A WAY TO MAKE MONEY IF THE STOCK PRICE GOES DOWN. WHAT DOES BUY TO CLOSE AND SELL TO OPEN MEAN IN OPTIONS TRADING OF STOCKS?
Simply put, you’re investing in the stock to go down.
Normally, you’d buy to open, hope that the price goes up, then sell to close.
If you thought the stock would go down, you’d do the opposite. Sell to pen first, have the stock price go down, then buy to close. You keep the difference minus commissions.
Options are different and a little more complex. In options, usually you use sell to open in conjunction with a buy to open on a different option. But you could just do what’s called going naked.
You sell to open and buy to close a "put" option if you thought the stock was going up. Or you’d sell to open and buy to close a "call" option if you thought the stock would decrease.
This is the simple definition. Trading options takes more education, so be careful if you decide to do so. Because they are leveraged, you can lose money much, much faster with options if you don’t know what you’re doing. Education is the key for consistent success.
Best of luck. Hope that helps!
i am confused about option trading in stock mkt.?
i am still confused about option trading
I know when u r bullish about a stock ,u can buy call option or sell put option.
Suppose I think that a price of a stock is going to rise in a month or two. having decide to buy a call which should I buy—— There r a number of 1 month calls trading with different STRIKE PRICE. at which price shouldi buy
What IS the maxium premium that I will give ?
what is the maxium amount of stocks that I will buy in a lot? Suppose I buy at the lowest strike price what will be the premium?? What is deep in the money that trades at a higher premium What is out of the money that trades at a lower premium
<<<I know when u r bullish about a stock ,u can buy call option or sell put option.
Suppose I think that a price of a stock is going to rise in a month or two. having decide to buy a call which should I buy>>>
You probably should not buy any until you can decide for yourself which one you want to buy. The risk/reward characteristics are different for the different options. You should choose the option that has the characteristics you want.
<<<There r a number of 1 month calls trading with different STRIKE PRICE. at which price shouldi buy>>>
You should choose the option that has the characteristics you want. Until you know how to do that you should not buy any.
<<<What IS the maxium premium that I will give ?>>>
The maximum price possible for a call option is the price of the underlying.
<<<what is the maxium amount of stocks that I will buy in a lot?>>>
Unless the option has been adjusted, the underlying for each stock option is 100 shares. An option my be adjusted due to a split or a merger.
<<<Suppose I buy at the lowest strike price what will be the premium??>>>
For any two call options with same expiry and underlying, the one with the lower the strike price will be more expensive. that means the one with with lowest strike price will be the most expensive.
<<<What is deep in the money that trades at a higher premium What is out of the money that trades at a lower premium>>>
If the price of the underlying is equal to an option strike price, the option is "at the money". If the price of the underlying is less than a call option strike price, the option is "out of the money". If the price of the underlying is more than a call option strike price, the option is "in the money". If the price of the underlying is a lot more than a call option strike price, the option is "deep in the money".
—–
You are not going to learn about options very effecitvely just by asking question. You need a more structured learning environment.
One place you can start is with the free tutorials at
http://www.cboe.com/LearnCenter/Tutorials.aspx
Another good web based learning resource is
http://www.optionseducation.org/
Even though these are good resource, I still strongly recommend you read one or two good books about options before trading them. All of the books in the bibliography at
http://www.cboe.com/Institutional/Bibliography.aspx
are good books if they are written at a level you you can understand.
I will also mention there is a new book out titled
The Rookie’s Guide to Options:
The Beginner’s Handbook of Trading Equity Options
writen by Mark Wolfinger who (as "dagnyt") regularly answers questions on the message board at
http://messages.yahoo.com/Business_%26_Finance/Investments/forumview?bn=4686677
If the ability to ask the author questions directly appeals to you that may be a choice worth considering. You can read more about it at
http://www.mdwoptions.com/
Option Trading, Volatility of Stock, Option Price, Price Movement?
From what I understand, an Option will have larger price movements if the underlying stock has a low volatility, and then makes a big price change, than if a stock with a high voliatility
makes a big price change…Would that be an accurate statement??
assuming everything else being equal.
That should be true. Low vega options with a spike in volatility should have a bigger price change than high vega options but…
It depends. Options are priced based on EXPECTED volatility (often called implied volatility because the expected volatility is implied in the option’s price) but you’re asking about the stock’s volatility (also called historical volatility) so it’s a little apples and oranges