The idea of options trading online may sound exciting to you, but how do you get started? You’ve read a bit about stock options trading, and you’ve tried to understand the basic concepts and strategies, but you’ve been overwhelmed by the jargon. So where do you begin?
The simple fact is, there is no shortcut to this kind of investing. You need to begin at the beginning - by understanding a few of the critical concepts and some of the specialized terminology used by stock option traders.
The first thing to understand about stock options is how they differ from the usual strategies involved in buying and selling stocks. When it comes right down to it, those strategies are based on buying low and selling high. The only way you will profit from this is by buying stocks that are likely to increase in value, and then selling them when they actually have increased in value.
But what happens when stock prices start to go down - as happened recently during the collapse of 2008? At that point your strategic choices are limited: you can either cut and run to minimize your losses, or you can wait it out and hope the market recovers enough to recover your losses. Neither of these is what you would call a very aggressive profit-oriented strategy.
Options trading is different. With options trading you can profit regardless of the way stocks are moving: up, down or sideways. By selectively and strategically trading options you can quickly isolate and cut your losses, protect your gains, and even control large amounts of stock with a relatively small amount of capital.
On the other hand, options trading is risky. The fact that options trading strategies can be complicated means that the beginner may expose him or herself to risks that they do not fully appreciate or understand. These can lead to the loss of a trader’s entire investment or even expose them to losses that go well beyond their actual investment.
In other words, with the opportunity for significant profit there is always significant risk. In options trading this risk is increased by the fact that the non-expert is swimming in murky waters filled with hidden hazards and hungry sharks.
The best advice for the would-be online options trader is to hook up with an online broker who can help you get started by protecting you from the hazards. Find a discount online broker with reasonable fees and a simple, transparent pricing structure. Make sure they have a help line you can reach by phone, and a forum where you can share information with other traders of different levels of expertise.
Do yourself a favor. Before you begin your career as an online options trader, read as much as you can about how the game is played. Then develop a beginning strategy that will insure your career is not over before it begins.
Join more than 130,000 other satisfied traders by opening an account with TradeKing.com, the online options broker voted by SmartMoney Magazine the #1 discount online broker for stock and options trading 2 years in a row.
