Can Anyone Advise a Newbie on Options Trading

[Johnshuff]

Hi all,
I'm new to T2W and just feeling my way around.

For some time now I've been researching 'Options Trading'. From what I can gather this trading method appears to carry a large danger sign. Even so, it does appear to be a very profitable and fast way to accumulate some financial gain.

I would welcome any feedback from T2W members and thier opinions.

Regards... JohnShuff

 

[RogerM]

JohnShuff - Options are best left alone until you can swing trade shares profitably. Then start with Index options rather than equity options. Also you need a lengthy period of papertrading so that you can see for real how option prices change over time and changing trading conditions.

Trading an instrument directly (i.e. shares, index futures, forex) is one dimensional - i.e. price only changes in direct proportion to the change in the value of the instrument being traded. Options are multi-dimensional, changing in value not only with price of the underlying, but also over time and changing volatility, and to a lesser extent with interest rate changes and dividends. Get all these right and you really have something going for you. Get them all wrong and the position can move against you with a speed and ferocity that you would not believe unless you've seen it first hand.

You may find some of the links in the T2W Guide useful :-

http://www.trade2win.com/boards/showthread.php?t=8414

Most people start by simply buying a cheap OTM option and hoping that the market moves in your direction. This is the hardest way to play the game. IMHO you need to get to grips at a very early stage with spreads - i.e. selling options at one level and covering them with long options at another.

 

[Johnshuff]

Thanks very much for your advice Roger, it's appreciated and definitely noted,!

Regards...
Johnshuff