Options trading success
These are as follows. Beginners should start with the first section and then work through each section in order, while those of you looking for specific information will probably prefer to skip straight to the relevant area.
If you would like to know more about what these sections are all about, you can find details on each of them further down the page. There are also a few other articles which you may be interested in. We have written a page explaining in full what this site is all about, and introducing the people behind it. We have compiled a useful glossary of terms too, which is a comprehensive list of the jargon and technical words used.
For those of you interested in such things, we have also written a complete history of options. This details how the market evolved over time to create the thriving industry which exists today. This introduction has been compiled specifically with the beginner in mind.
If you are completely new to all of this, or investment in general, then this section is the best place for you to start. We have included detailed articles to explain exactly what a contract is, and what it is is all about. We have explained the benefits and the risks involved, where you can buy and sell contracts and how the contracts work in practice. Finally, we have provided detailed explanations of the key terms and phrases that you will come across — such as moneyness, leverage, margin and time decay.
Options are one of the more complex financial instruments, and before you can think about starting to buy and sell them you really need to understand certain fundamentals. In this section we have provided comprehensive information about the numerous types of contracts you can trade, and the various orders you will need to place. This section also includes details on the different trading styles that are typically used and an introduction to spreads, which are a vital component in most of the strategies that can be used.
Finally, we have also provided a selection of articles comparing options to other financial instruments such as stocks, bonds and futures. We have produced this section essentially as a step by to step guide to actually getting started as a trader, and it includes details of all the preparation required before starting. The guide explains the importance of defining your investment objectives and setting out exactly what it is you are trying to achieve.
We also offer advice on preparing a trading plan, choosing a suitable online broker, identifying suitable opportunities and recording and managing all your activities. Other topics covered are how trading levels at brokers work, how to plan individual trades and tips for managing your risk exposure and your investment capital.
One of the most important decisions you need to make when setting out is which broker you are going to use. Although you can change your broker at any time, getting the decision right the first time around will greatly enhance your experience, may even increase your profitability, and should certainly make things easier for you. In this section, we provide the details of a number of recommended brokers that we believe are the best around.
As not every trader will necessary be looking for the same things from a broker, we have categorized our recommendations based on different attributes and qualities they have. We have listed the best options brokers for beginners, for example, and the best brokers for trading binary options. While there is a lot you should learn before you start, most of the relevant information is relatively straightforward and it is simply case of managing to take it all in.
You do not need to learn absolutely everything pertaining to options trading at the beginning, but once you have gained some experience you will likely find that you want to further expand your knowledge as you go along. Use them wisely and they will treat you well. Options are best used as risk-reducing investment tools, not instruments for gambling. Read my article, why trade options? Use the options Greeks to measure risk. Do not hold any position than can — in the worst case scenario — cost more than you are willing to lose.
Be careful about the number of option contracts you trade. Do not expect miracles. Not zero, just tiny. Selling naked options is less risky than buying stock.
But, like stock ownership, there is considerable downside risk.