new to option

hi!! just need to know that what ae the rules to follow so that we will not lose out in option trading....2)what are the things to consider before we choose the strike price? 3) how do we rate the volatility?? tq ppl in need

What sort of holding timeframe are you planning on having?

just abot few weeks

My personal philosophy on which options to trade is as follows:

1) Pick the strike price closest to the current market rate ( At-The-Money or ATM ). If you select one out-of-the-money, your odds of closing the trade profitably decrease rapidly. The pay-out to cost ratio may seem fantastic, but your chances of success are low. At the same time, options that are well in-the-money do not provide optimal risk/reward situations as their costs are substantially higher.

2) Select a contract month that will have at least 1 month of time left on it when you anticipate selling. This will help avoid getting in to a situation where you start seeing rapid declines in the option premium because of time decay.

As a directional player I don't spend much time thinking about implied volatility. I've had a lot of success with these guidelines.

Options are a highly versatile financial instrument, and they allow you to take advantage of many different market situations.

In order to assist you, I would need far more information as to what you want to achieve and what risk levels are acceptable to you.

To be honest, the advice given to you by Rhody Trader is far too simplistic.

You should ALWAYS take into account implied volatilities.

I am pleased that Rhody Trader's system works for him, but I personally would not recommend taking his approach.

There are definitely a lot of different things you can do with options depending on what you are trying to achieve. I used to work in the options market, so I'm well aware of the various types of strategies, pricing, etc. For someone new to the market, and making a stright-forward directional bet, it is better to keep things simple. Once a comfort level with the basics of how the markets work is reached, then you can start looking at more intricate strategies.

hi thks 4 ur reply..so what would u suggest for a beginer to trade in options?? what are the strategies that you can recommend?? of cause my first intention is to get extra income but later would like to be a full time trader...hear from u soon. tq david

hi pal!! first i will try in virtual trading and to familirise with the strategies that works for me...i want to become a full time trader but at a minimun risk...hope that u will giv me more info regarding how to pick the strike price, and what are the rules that i must comply/ follow in order for me not to lose out in option trading

tq
david