New to Options Trading

[N_Goodwin]

Hello

I have long experience trading individual stocks. Now I want to make millions in options. I can pick vloatile stocks but when I go to view an options chain I get confused.

I know about different strike prices but do not know which option to buy. It seems like the last or stock price on the higher strike priced call options is zero, or am I reading this incorrectly?

If someone could help me figure this out I would appreciate it.

Thanks

 

[jasonnoguchi]

Option trading is a very different ball game than stock trading and you need to have a very comprehensive knowledge before you can attempt it. It is not as easy as what strike price to buy what because the greatest evil in option trading is not knowing what you do not know... and the inevitable surprise that comes along.

I have prepared a free site to teach you everything you need to know at http://www.optiontradingpedia.com . Hope it helps.

 

[NotQuiteRandom]

Vanilla options are my 2nd favourite trading instrument... ;-)

To get started you should read the following, in this order, then start looking at some data. You can quit after book 2 if you only want a very cursory knowledge.

1) Options Plain and Simple (Lenny Jordan)

2) Option Volatility and Pricing (Sheldon Natenburg)

3) If you get through Natenburg and want to understand vanilla options a little better, you would do well to contextualise them within the universe of other derivatives. To do this start with: Options Futures and Other Derivatives (John Hull)

4). Then go for a beginners book on Exotics. It will give you a good 'mode' of thought. A starting point would be: Pricing and Hedging Exotic Options (Nassim Talleb).

Good luck,

NQR

 

[Rhody Trader]

I'm going to argue against all the talk that option's trading is highly complicated.

It is certainly true that it can be. These days there are a great many different types of options out there and there are definitely lots of intricate strategies one can employ. If, though, all you're really after is directional trading, then options trading can be quite simple.

There are a couple of basic things you need to know. First is what puts and calls are. Second is the elements that going in to options prices, which are intrinsic value, time to expiration, and the volatility of the underlying market. If you can grasp those concepts, you're good to go.

I don't have links at-hand, but I'm almost positive there's at least one very good introductory article on the subject in the Articles section of the site.

 

[Erik Schouman]

Options Trading

There is quite a difference between buying stocks outright and purchasing stock options. When you purchase a stock option, you are betting on the direction of the stock price. However, stock option trading is a purchasing stocks and there is a lot of terminology and tricks of the trade that a new stock option trader should learn in order to successfully trade stock options. An option in the stock exchange terminology means ‘a right.’ Stock option is nothing but right to buy or sell a certain security within a certain time and at a certain price is purchased from a dealer. Get more information on Stock Options from Learning Options Trading

 

[zambuck]

There is somewhat similar discussion at link below....

http://www.trade2win.com/boards/opt...ns-book-uk-stock-trading-worked-examples.html

 

[philo]

Hey the N_Goodwin,
if you want to learn how to read option quotes or chains, here is an article I found on just the subject.

MoneyAccumulator.com » Blog Archive » How To Read Option Quotes

Check it out, this guy also has a small intro to option tutorial

MoneyAccumulator.com » Blog Archive » Intro To Option Trading - Part 1

The tutorial goes from part 1 to part 6 under Option Trading category, I read it, it has helped me understand options a
little better.

Cheers! :idea:

Philo