options-george
Guest Author
- Messages
- 484
- Likes
- 94
Recently there have been a couple of threads asking some simple questions in the area of option trading.
To qualify what I am about to say - I have done about 12-18 months of trading US equity options, having done either outright puts or calls, as well as some simple debit and credit spreads. In addition I spent 6 months (11 hours a day) working as an assistant to an options market-market in Euribor futures. I also have a basic grasp of probability distributions and volatility, and generally of how options work.
With that in mind -> I feel obligated to warn new traders about going into the options area. I am sorry if this comes across as direct or too harsh, but I feel that I need to warn traders of trading options before they are ready.
Financial markets in general is quite difficult to do. Yes it's very easy to get started, you open an online account and from day 1 you can buy and sell whatever instrument you like. It gives the impression that there is little education or learning required. And surely if you have done a weekend course or read a couple of trading books, than you are effectively ready to trade with the rest of the market, right? This is not how it works - the issues of technicals, psychology and risk management really take some time to understand. And this is when you are dealing with doing spreadbetting on a currency or a CFD on an index etc. An instrument that simply goes up and down.
With options, it's another entire different kettle of fish. Understanding how options work and how to trade them is significantly more difficult than trading a CFD or a spreadbet. You need to understand the different strategies, you need to understand the implications of Black-Scholes, of what can impact an option price, the practical considerations of an options position.
If you don't have that solid understanding, you will be skinned alive in the options market!
You will NOT learn what you need to understand in the space of a weekend course or reading a couple of option-related books. Training providers in this area are not being open and honest about your preparedness!
PLEASE tread very carefully!!!
To qualify what I am about to say - I have done about 12-18 months of trading US equity options, having done either outright puts or calls, as well as some simple debit and credit spreads. In addition I spent 6 months (11 hours a day) working as an assistant to an options market-market in Euribor futures. I also have a basic grasp of probability distributions and volatility, and generally of how options work.
With that in mind -> I feel obligated to warn new traders about going into the options area. I am sorry if this comes across as direct or too harsh, but I feel that I need to warn traders of trading options before they are ready.
Financial markets in general is quite difficult to do. Yes it's very easy to get started, you open an online account and from day 1 you can buy and sell whatever instrument you like. It gives the impression that there is little education or learning required. And surely if you have done a weekend course or read a couple of trading books, than you are effectively ready to trade with the rest of the market, right? This is not how it works - the issues of technicals, psychology and risk management really take some time to understand. And this is when you are dealing with doing spreadbetting on a currency or a CFD on an index etc. An instrument that simply goes up and down.
With options, it's another entire different kettle of fish. Understanding how options work and how to trade them is significantly more difficult than trading a CFD or a spreadbet. You need to understand the different strategies, you need to understand the implications of Black-Scholes, of what can impact an option price, the practical considerations of an options position.
If you don't have that solid understanding, you will be skinned alive in the options market!
You will NOT learn what you need to understand in the space of a weekend course or reading a couple of option-related books. Training providers in this area are not being open and honest about your preparedness!
PLEASE tread very carefully!!!
