Option Trading Tutorial – An Introduction

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For so long options have been regarded as risky investments. Too expensive, or too sophisticated, but with that they carry huge profitable opportunities. There are many notable advantages of trading option including cost efficiency, higher potential returns, and a strategic alternative way of generating income. Most of these advantages have been outlined in various options trading tutorials as well as other sources.

Plunging into the market without sufficient information is one of the main reasons why most investors have lost money in options trading. Many people tend to find most of the written information about trading options cumbersome. However, this options trading tutorial will only give a general overview of what stock options trading is all about in order to help you get started.

Certainly, investing in the options market naively is bound to bring you loses more often than not. Whether you are using your risk capital for trading or not, you just need to remember, that money lost will never be recovered. However, with this tutorial, you will be able to increase your chances of dealing with expected profits, while you mitigate the risks of losing your money. When you have the right information, making an informed decision will not be a challenge to you

So how do you secure yourself from incurring losses in your stock assets? Primarily, getting the right information is the main secret of avoiding losses in options trading. Fortunately, you can enhance your knowledge about options through getting an expert option trader as a mentor, spending time reading written materials both online and otherwise about options trading. Opting for an expert in the industry can also be invaluable source of learning about options trading and strategies you can use for successful trading. Ultimately, the information your equip yourself with will be your main asset in option trading venture.

Your mentor needs to have proficiency in the theories and practical aspects of trading options as well as notable experience in the industry. The mentor needs to be in a position to answer your questions in a clear way and should be able to demystify options trading for you. The fact that you can get immediate feedback should be a plus for you in your learning process.

If you have no budget set aside for your learning, you do not need to fret. You can subscribe to free online tutorials and courses that can go a long way in improving your knowledge in the same. Some tutorials are more comprehensive, taking you from introduction to the most advanced aspects of options trading to even portfolio management.

The main advantage of such online tutorials for options trading is the flexibility of choosing your convenient time to learn, learning at your pace, and determining your level of learning. You can opt for a slow or speedy learning depending on how fast you grasp the concepts and depending on your trading needs.

You should not limit yourself to one source of information; in fact, the more information you have about options trading the better for you.

 

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Index Options: Earn a Living Trading Options – Video 6

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Good morning tradeologists.

Today is Monday, May 12, and we’re going to take a quick look at our trades for today.  Now we’re going into expiration week and, as I mentioned, we had a little insurance policy on the QQQs just in case we got a big drop in the markets over the weekend.  It cost us $65 but that’s cheap insurance because we’re already up over $140 for today.  We have an open profit of $935 dollars.  Let’s take a quick look at our analyze tab.  That $65insurance was well worth it because we made up more than that just in the profit today as we open and it really didn’t cost us anything at all and the insurance was very, very good for us.

So here we are today.  Like I said, we’re up $135.  We are moving back towards the center very nicely on our position.  We are going to keep a close eye on this position.  Of course we are in expiration week and I normally like to get out earlier.  However,we are going to try and squeeze every little bit of profit out of our positions as possible.

We have the positions on the DIA, the EEMs, the IWM, and the SPY.  We want to take a quick look at the VIX.  Let’s take a look at where we are.  We went up here a little bit.  If you can take a look down here in thecorner, we’ve been dropping significantly.  Well, I didn’t know for sure but I thought possibly we could  jump up here and retest this level around $21.50 or $22.00 and that didn’t happen this morningso that’s why we closed out our insurance.  We bought the QQQs as insurance and we closed those out early this morning when we saw that, in fact, the market was not going to drop like a rock and retest those VIX levels so we’re falling back down again.  I think we’re going to retest these 18 levels so we should be up for the day.

We’ll see exactly and keep monitoring our position but at this time we don’t really have to do anything as long as we stay to the upside.  We’ve got plenty of room to move to the upside here and we’re going to continue to make a profit on this position today.  We should be close to $1,000 in open profit.  Now remember we’re only trading one or two contracts so this is a pretty good profit and all we have to do is just be patient and wait.  This white line here which is our current profit and loss position is joining the expiration green line here which is only 5 days away.

Let’s take a look at our monitor tab or our trade tab and we can see there’s only four trading days left in this position.  Ideally we’d like to be at the center and all of our positions would expire absolutely worthless and that will give us the maximum profit.  So we just have to sit back, relax and just monitor.

Normally during a trade when you’reputting on trades 30 to 40 days ahead of time, you don’t really have to be that concerned with the day-to-day market fluctuations but as we get closer to expiration that’s where you really want to pay attention to your position.  So that’s what we’re going to do if you want to extract as much profit as possible.  However, I do not recommend holding positions into expiration week.  Price is the biggest risk during expiration week.

Let’s take a quick look at our monitor tab for a second and take a look at our numbers.  Our delta is a very nice little positive 94, our gamma is  190, and all gamma really means is that it’s the amount that the delta is going to change based on the overall position.  Theta has increased to a nice $129 a day.

So going into expiration week we should expect to collect another $128 every single day that we’re in expiration.  Our vega is at 121and that’s a positive number, meaningthat if the vega goes up we will increase our profits by $121.  However, given that delta is also a positive number they kind of neutralize each other there.  So what we want to do in our current profitable open is 925and we want to just take a look atour analyze tab for a second.  As long as we can continue to move up, where the Dow Jones is right now up about 30 points, we will be doing very, very nicely. We’re going to keep an eye on the market very closely.

We want to be able to stay in the center position and I think we’re going to be in really good shape to extract some moreprofit.  Now let’s take a quick look.  We are here and we’ve got $934 of profit in the position and if we go to expiration we’ll have about$1,800 if we stay stable as far as price goes.  So we’ve got another $900 in profit that we could extract from this position and we’re going to try to hang in there as long as we possibly can.  I mean I don’t want to get too greedy but we’re at 50 percent profit here.  We’re also up about 30 percent on our margin because our margin is $3,600.  We’ve got $900 profit on $3,600 of margin.  That’s a 30 percent return on margin so we’re doing really, really well.

Price doesn’t seem to be too much of a risk right now so we’re going to hang in there.  If things start to get a little bit more volatile, we’ll probably close out this position.  You know 30 percent return on margin is pretty awesome.  We’ve only been in theposition for about four weeks now so that’s a great monthly return.

All right tradeologists, hey trade withconfidence.

 

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