Newbie needs help

[DollarSigns]

I want to learn more about trading options. I've obviously taken the first step by signing up to this forum but need some input on where to go next. I've read a few books on trading and have been practicing technical analysis on the currency market using MetaTrader and a demo account.

I have never traded options on a live account but I'm hoping that after a little (or lot ) of practice I should be able to start with about $1000.

I have a full time job and can't spend more than an hour a day on trading. Just need your thoughts on what I should star with - books, demo accounts software etc.

Any comments (even critical will be greatly appreciated.

 

[Pazienza]

I want to learn more about trading options. I've obviously taken the first step by signing up to this forum but need some input on where to go next. I've read a few books on trading and have been practicing technical analysis on the currency market using MetaTrader and a demo account.

I have never traded options on a live account but I'm hoping that after a little (or lot ) of practice I should be able to start with about $1000.

I have a full time job and can't spend more than an hour a day on trading. Just need your thoughts on what I should star with - books, demo accounts software etc.

Any comments (even critical will be greatly appreciated.

Just out of interest, why have you chosen options?

 

[DollarSigns]

Just out of interest, why have you chosen options?

Primarily because they require low capital (I only have a couple of thousand to invest) to get started than stocks. There's potential for high returns (and associated risk too...I'm aware of that).

 

[Pazienza]

Primarily because they require low capital (I only have a couple of thousand to invest) to get started than stocks. There's potential for high returns (and associated risk too...I'm aware of that).

Fair enough. You might find options a tricky proposition starting out though. There are easier things to trade.

 

[DollarSigns]

Fair enough. You might find options a tricky proposition starting out though. There are easier things to trade.

Can you please tell me what my options are ) no pun intended)?

 

[Pazienza]

Can you please tell me what my options are ) no pun intended)?

Honestly, I think you've got things backwards. Pick your instrument and bring the appropriate account rather than look at your account and see what you can trade with it.

I'd recommend researching' learning and demoing . In the meantime build up your account and trade your preferred instrument when you're ready and able to do so.

 

[safvan]

Honestly, I think you've got things backwards. Pick your instrument and bring the appropriate account rather than look at your account and see what you can trade with it.

I'd recommend researching' learning and demoing . In the meantime build up your account and trade your preferred instrument when you're ready and able to do so.

 

[tomorton]

I flirted with traded options when I first had the ambition to trade as well as being a long-term shareholder. It is highly technical, the good strategies involve high risk or require a hedging position (so that your fees are effectively doubled). There are definitely easier ways to trade when new to the game and I am sure you don't need a massive account to get some early experience of the markets.

 

[Joey25]

I want to learn more about trading options. I've obviously taken the first step by signing up to this forum but need some input on where to go next. I've read a few books on trading and have been practicing technical analysis on the currency market using MetaTrader and a demo account.

I have never traded options on a live account but I'm hoping that after a little (or lot ) of practice I should be able to start with about $1000.

I have a full time job and can't spend more than an hour a day on trading. Just need your thoughts on what I should star with - books, demo accounts software etc.

Any comments (even critical will be greatly appreciated.

You can buy deep-in-the-money equity options to have a leveraged exposure to an individual stock, but with limited risk. The deeper in the money you go, the more the delta approaches 1, and the less you lose through time decay. It stops you losing your shirt if a company goes bankrupt or gets hammered (think HBOS).

 

[Beakytrader]

In all honesty, options can be pretty complicated. They require a thorough understanding of quite a few variables. I worked in the otc mkt, and it took me quite a while to get my head around it, and that was sitting on a trading desk for 11 hours a day.
I'd steer clear, as the others have pointed out, there are far easier mkts to try and trade.
Here's a site which gives some decent information which you'll need to know, if you do persist with options.

http://www.1option.com/index.php/definitions-option-trading/option_spread_butterfly/

 

[QuestOptions]

There two important elements you need to understand about options.
The theoretical side and the practical side.
I would start off by learning theory first and then work on the practical side.
The difference between options and say futures, stocks and currencies is that options are not-linear. They don't move in a straight line. You need to learn how an option is priced first.

To many new traders want to learn about strategies first and don't want to learn about the theory of option pricing. If you are used to trading products that move in and up and down straight line then options will be confusing for you because that is not their nature.

A great book on options theory is:
Black-Scholes and Beyond: Option Pricing Models by Neil Chriss
Once you understand the basics behind option theory you will be ready to tackle option strategies. Too many people fail because they try to learn the strategies before they learn the theory behind options.

 

[safvan]

Medium term to long term options investing in fundamentally sound companies that are showing price momentum is a good strategy.

There are ways around it if you are not looking for short term trading. Understanding how stock prices move around is the key.

 

[safvan]

Basically anyone who can trade either long term value based investing or medium term momentum based trading can make money in options.

In any case it should be done with risk capital which is the money you can afford to lose forever.

 

[QuestOptions]

an option is priced on these elements:
risk free interest rate
cost of carry (in some products)
dividends (in some products)
the movements in the underlying asset price
the strike price you select
and volatility

there are strategies that you can implement that focus on directional moves and there are other strategies that you can implement that focus more on time and volatility than direction.

If you are just thinking market direction (prices moving up or down) thats not enough in my opinion to be a succesful options trader. Volatility and Time play a major role in options so they can not be ignored.

Just because you are a successful futures, currency or stock trader doesn't mean that its going to translate to you being a successful options trader. There are certain types of skill sets that you need to acquire to make it in options trading.

Thinking the market is going up or down is not enough knowledge to start trading options.

With the improvement in technology and many of the markets going electronic this will help your learning curve.