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Would it be okay sharing how you are approaching options trading? What steps would you recommend someone who would like to start with the basics?

peterlk 7y ago
The two ways I got started were: 1) open a Robinhood account with a small amount of money ($100) ought to be enough. Buy in and out of stocks every day for a couple days until you can get approved for their level 2 trading. Then, start playing with options. 2) Open an account on ThinkOrSwim and use their tools to trade a dummy account or use real money. The learning curve of ToS is higher, but it is more powerful The fundamentals are pretty simple, but the strategies for combining simple elements can become very complex. The fundamental questions are: will this "stock" (you can trade options on other financial instruments as well) move up, down, neither, on both? To what extent? Over what time period?
itemGrey 7y ago
I'm also interested in this. Would be great to share some resources.
- hattori 7y ago
  Golden rule from my perspective, regardless of asset - don't follow analysts (it's all about risk management and if strategy/indicator is public it's highly likely ineffective) and price action is king. Playing with automation as supplement to above is smart investment.
- arminiusreturns 7y ago
  I also have been learning about options. My goal has been to understand the financial sector better first and foremost, and only secondary is making some money. I am a newb whos only been going for about 6mos at this so fair warning to not listen to me at all. 1. The entire market is a big casino. The main question is what kind of risk you want to assume in your bet. Everything you do in the market is a bet/gamble. Don't fool yourself otherwise. 2. Options are a high risk avenue, but can also have some of the highest returns. 3. Learn the lingo. Traders use it so much you will be lost if you don't. (https://www.investorsunderground.com/acronyms/ https://www.investorsunderground.com/acronyms/) 4. Start small to learn the ins and outs of your broker. 5. Understand that stocks are not a reflection of the companies actual value. They are a reflection of the markets perceived value of the company. The difference is enormous. 6. Do your own DD (due diligence). Read the docs the company has and is putting out. Do your own math. Don't rely on analysts, but you can use them as a reference. 7. Learn what IV crush is!!! (theta gang ftw) 8. Learn the most common strategies used. The wheel, put debit spread, cash covered calls, etc. Different situations and risk profiles in the moment are better suited to certain strategies. 9. See what crazy plays turned out good, and which ones bad, and seeing what strategy was used, how was the DD, etc. 10. Lastly, and less commonly talked about, never underestimate the power of powerful people's connections and interests in a company/stock. This is why I tend to focus heavily on ownership analysis and board analysis. Sometimes every normal, quant level algorithmic indicator points one way, but the connections say otherwise... and the connections almost always win out. Bonus material: https://www.youtube.com/channel/UCcmZHsuUt_DOzcgIcLd0Qnw https://www.youtube.com/channel/UCcmZHsuUt_DOzcgIcLd0Qnw
juped 7y ago
Sell defined risk credit spreads 30-60 days out on underlyings with high implied volatility where the max loss is a small percentage of your bankroll. Buy them back at some percentage of max profit (50% is a good general rule). Read or watch videos until you understand why this is a good starting point - there's tons of resources out there. Yes, brokers are idiots who think defined-risk spreads are more "advanced" than holding the bag for premium decay and not even knowing why you're losing money. Sorry.

peterlk 7y ago

The two ways I got started were: 1) open a Robinhood account with a small amount of money ($100) ought to be enough. Buy in and out of stocks every day for a couple days until you can get approved for their level 2 trading. Then, start playing with options. 2) Open an account on ThinkOrSwim and use their tools to trade a dummy account or use real money. The learning curve of ToS is higher, but it is more powerful The fundamentals are pretty simple, but the strategies for combining simple elements can become very complex. The fundamental questions are: will this "stock" (you can trade options on other financial instruments as well) move up, down, neither, on both? To what extent? Over what time period?

itemGrey 7y ago

I'm also interested in this. Would be great to share some resources.

hattori 7y ago
Golden rule from my perspective, regardless of asset - don't follow analysts (it's all about risk management and if strategy/indicator is public it's highly likely ineffective) and price action is king. Playing with automation as supplement to above is smart investment.
arminiusreturns 7y ago
I also have been learning about options. My goal has been to understand the financial sector better first and foremost, and only secondary is making some money. I am a newb whos only been going for about 6mos at this so fair warning to not listen to me at all. 1. The entire market is a big casino. The main question is what kind of risk you want to assume in your bet. Everything you do in the market is a bet/gamble. Don't fool yourself otherwise. 2. Options are a high risk avenue, but can also have some of the highest returns. 3. Learn the lingo. Traders use it so much you will be lost if you don't. (https://www.investorsunderground.com/acronyms/ https://www.investorsunderground.com/acronyms/) 4. Start small to learn the ins and outs of your broker. 5. Understand that stocks are not a reflection of the companies actual value. They are a reflection of the markets perceived value of the company. The difference is enormous. 6. Do your own DD (due diligence). Read the docs the company has and is putting out. Do your own math. Don't rely on analysts, but you can use them as a reference. 7. Learn what IV crush is!!! (theta gang ftw) 8. Learn the most common strategies used. The wheel, put debit spread, cash covered calls, etc. Different situations and risk profiles in the moment are better suited to certain strategies. 9. See what crazy plays turned out good, and which ones bad, and seeing what strategy was used, how was the DD, etc. 10. Lastly, and less commonly talked about, never underestimate the power of powerful people's connections and interests in a company/stock. This is why I tend to focus heavily on ownership analysis and board analysis. Sometimes every normal, quant level algorithmic indicator points one way, but the connections say otherwise... and the connections almost always win out. Bonus material: https://www.youtube.com/channel/UCcmZHsuUt_DOzcgIcLd0Qnw https://www.youtube.com/channel/UCcmZHsuUt_DOzcgIcLd0Qnw

juped 7y ago

Sell defined risk credit spreads 30-60 days out on underlyings with high implied volatility where the max loss is a small percentage of your bankroll. Buy them back at some percentage of max profit (50% is a good general rule). Read or watch videos until you understand why this is a good starting point - there's tons of resources out there. Yes, brokers are idiots who think defined-risk spreads are more "advanced" than holding the bag for premium decay and not even knowing why you're losing money. Sorry.