Options "My Dream"

[NEWOP43]

Hello, to all wise ones.
I am left of being a newbie. So, my question is simple. Should I develop a business plan straight away or, should I play some options and when I feel that this is a good row to hoe go ahead and build one then. next, would anyone recomend options services for rcommendations for green traders? Just to get feet wet or learn how to make my own choices? ps, if you are a solicitor be warned, I have a nack for spotting you!

 

[Vrothdar]

If you want to get your feet wet a bit I'd recommend demo trading while you work out a trading plan of your own. Personally I'd avoid using other tipping services myself (as I said in your other thread) and work on my own reasons to make a trade that will suit you personally.

You need to consider how much time, and when, you can spend at your PC - Does the trading time frame this allows suit you as a person? How much starting capital you have and how conservatively, or aggressively, you wish to trade.Test your ideas either by back testing or demo trading them for at least a few months. Finally beware the pitfalls of human psychology and be honest with yourself.

Question everything you do. Why, for instance, have you chosen options? Is it definitely the market best suited to you?

That is kind of rhetorical as I don't know enough about options to offer any advice but before deciding to pursue trading forex (Currently developing my own trading plan so haven't placed a single real trade yet) I found out enough about options, and any other market I could think of, to decide whether or not it was something I'd feel comfortable about trading.

Hope that helps.

 

[anley]

My advice is stay well clear of options they are NOT for people just starting out.

Think of options knowledge as like an iceberg, the part you most probably understand is the top 10% that's sticking out of the water. Trouble is that unless you know and REALLY understand the 90% that is below it's almost impossible to make money over time.

Do you for example know and understand what volatility is, how it works, the role it plays in determining and option's price and above all it's very subtle nuances?

 

[NEWOP43]

thanks for all the feedback. I shall keep it my pocket!

 

[Glenn]

Options are a wasting asset.
Are you thinking of buying or writing ?
Buying options is the same as buying insurance. You pay a premium and most of the time nothing happens, so you lose the premium. Time works against you.
Writing options is like selling insurance. You receive a premium and most of the time nothing happens, so you get to keep it. Just be ready for the occasional nasties that can wipe all your profits for the year ! You need plenty of margin to be able to write options.
If you are writing, stay far out of the money and let time work for you.
Sell Puts at lows and Calls at highs. Either let them run to expiry (a friend of mine makes a regular living doing this with Euro style options) or take profit when there's not much time or premium left.
Be aware of the difference between US and European style options.
If there's not much volatility, the premiums you receive will be smaller and the risk greater, so better to stand aside and wait for volty to return.

If you're good at calling Market direction, trade futures instead, or if you want less risk, trade stocks. Mkt going up - buy strong stocks, and short weak stocks if mkt going down.

Glenn

 

[NEWOP43]

well the only way I would consider options is if someone with a proven track record that I trusted were picking them for me. Since niether apply. I am lookig for a way to get in the investing business. That is, easy to learn low risk and good way to build knowledge. Sorta on the job training if you will.

 

[anley]

well the only way I would consider options is if someone with a proven track record that I trusted were picking them for me. Since niether apply. I am lookig for a way to get in the investing business. That is, easy to learn low risk and good way to build knowledge. Sorta on the job training if you will.

Just get trading with very small amounts of money, risk say a total of $1000 over 6 months. You'll learn far more doing it that way than studying the markets with no money at risk. Yes, the ultimate goal is to make money but if you lose it then you'll often learn far more than making cash (to start with). Good luck.

 

[rockseller]

Fews questions forumites,

1. Looking to insure my long positions on futures (Dow index). Can you advice me what options would be appropriate to cover against such positions in case moves in other direction.

2. What is the relationship of movements between options and futures markets.

3. Books/ website which explains options in depth.

4.Factors affecting options pricing.

Options are a wasting asset.
Are you thinking of buying or writing ?
Buying options is the same as buying insurance. You pay a premium and most of the time nothing happens, so you lose the premium. Time works against you.
Writing options is like selling insurance. You receive a premium and most of the time nothing happens, so you get to keep it. Just be ready for the occasional nasties that can wipe all your profits for the year ! You need plenty of margin to be able to write options.
If you are writing, stay far out of the money and let time work for you.
Sell Puts at lows and Calls at highs. Either let them run to expiry (a friend of mine makes a regular living doing this with Euro style options) or take profit when there's not much time or premium left.
Be aware of the difference between US and European style options.
If there's not much volatility, the premiums you receive will be smaller and the risk greater, so better to stand aside and wait for volty to return.

If you're good at calling Market direction, trade futures instead, or if you want less risk, trade stocks. Mkt going up - buy strong stocks, and short weak stocks if mkt going down.

Glenn

 

[MrGecko]

thinkorswim Home - Stock Option Investing - Stock Option Trading - Online Trading Stocks and Options

Register, Download, realize how much you need to learn.

Go to amazon, buy lots of textbooks.

 

[anley]

Rock

Re question 1. Never forget that insurance costs money so what you'll most probably find is that when you buy the option you'll lose money on both sides of the trade, ie the option and the futures position.

Assuming you're long futures you have to accept risk to make a higher return. If you reduce your risk then you'll reduce your return as well. Otherwise you'd have a perfect money making machine, no losses only profits.

Question 4 - Too many to mention, but market direction, time till the option expires and current and future volatility are the most important ones. As I said earlier, understanding optons is like understanding an iceberg, if you see a picture of one you only see the 10% that's above the surface. If youwant to use options correctly and have at least half a chance of not losing money then I'd advise you study them IN DEPTH for at least 6 months, if not a year. Remember, the people that are taking the other side to you potential option trade are the generally the mot sophisticated and switched on people inthe whole game. So if you're not up to their standard they'll sit back and take your money mot of the time, with the only chance of winning (overtime) is if you get lucky. Dn't mean to sound defeatist but options are very very hard to make money in, unless you're a market maker and even then it's still very hard. Good luk.

 

[SAINT]

Newop43- If options are what you want to use then do it and don't let anyway talk you out of it. Learning starts somewhere. As long as you understand that options are a steep learning curve and you shouldn't commit too much capital to start. As futures and options are linked it would also benefit to trade options. Start on e-mini options too. I paper traded options with saxo bank and also paper traded futures with interactive brokers. Theres some good options books on amazon.
'The bible....' by guy cohen is a great book. Also check out investopedia.com articles for options.. (rockseller- see above : )