This simple yet very profitable options trading tutorial will help you understand how to trade stock options.
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I have no idea if options are even right for you, but I do promise to show you what has worked for me and the exact steps I've taken to use them to earn additional income, protect my investments, and to experience freedom in my life. Along with your case study, you'll also get my daily emails where I share my favorite option trading strategies, examples of the trades I'm currently in, and ways to protect your investments in any market. We respect your email privacy.
Trader Travis's YouTube Channel. The Options Trading Group, Inc. All stock options trading and technical analysis information on this website is for educational purposes only. While it is believed to be accurate, it should not be considered solely reliable for use in making actual investment decisions. Futures and options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses.
You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this video or on this website. Please read "Characteristics and Risks of Standardized Options" before investing in options.
Suite C , Lewiston ID Option Basics Module 2: Option Value Module 3: Option Strategies Module 4: Stock Charts Module 5: Using Indicators Module 6: Technical Indicators Module 6: This will offer the opportunity to discuss not only the trade itself as it develops, but also the use of some of the trading tools for trade analysis and trade management. Watch for the individual links to these to show up also in the right column and accessible from every page on the site.
Additionally, I'll be setting trade tutorial pages where I'll choose a strategy and create a trade page. This page will act like a trade journal so I'll have the opportunity to demonstrate this process as well.
Each new trade will have a page where the trade is set up and discussed as I prepare to enter. I will add updates to these pages as I monitor the trades and I'll ultimately have a trade conclusion where I assess the result of the trade and any lessons learned. This approach is intended to be a more formal demonstration of the trading plan , trade journal and trade log concepts I've discussed on other pages. What I'll be doing on this page is collecting all the option trading tutorials I put together.
From this page, there will be a link to details of each option trading tutorial. These trades will largely be constructed from index options or ETFs of a particular index. There are many reasons for this, some of which are outlined on the index option trading page and some on the ETF options page. The key reasons though for me has to do with volume traded and the fact that no trade is dependent on any one stock and any events that could cause huge swings. I want to point out that I've placed all these trades in an option paper trading account at thinkorswim.
I am NOT making any recommendations on any of these trades. The price you pay for an option, called the premium, has two components: Intrinsic value is the difference between the strike price and the share price, if the stock price is above the strike.
Time value is whatever is left, and factors in how volatile the stock is, the time to expiration and interest rates, among other elements. Every options contract has an expiration date that indicates the last day you can exercise the option.
Your choices are limited to the ones offered when you call up an option chain. Expiration dates can range from days to months to years.
Daily and weekly options tend to be the riskiest and are reserved for seasoned option traders. For long-term investors, monthly and yearly expiration dates are preferable. Longer expirations give the stock more time to move and time for your investment thesis to play out. A longer expiration is also useful because the option can retain time value, even if the stock trades below the strike price.
If a trade has gone against them, they can usually still sell any time value remaining on the option — and this is more likely if the option contract is longer. Options trading can be complicated. That education can come in many forms, including:. How to open a brokerage account. Reliable customer service should be a high priority, particularly for newer options traders. Consider what kind of contact you prefer. Does the broker have a dedicated trading desk on call?
What hours is it staffed? What about representatives who can answer questions about your account? Even before you apply for an account, reach out and ask some questions to see if the answers and response time are satisfactory.
Options trading platforms come in all shapes and sizes. They can be web- or software-based, desktop or online only, have separate platforms for basic and advanced trading, offer full or partial mobile functionality, or some combination of the above.
Check to see if the fancy stuff costs extra. For example, most brokers provide free delayed quotes, lagging 20 minutes behind market data, but charge a fee for a real-time feed. Similarly, some pro-level tools may be available only to customers who meet monthly or quarterly trading activity or account balance minimums.