New options trader needs help.

Discussion in 'Options' started by sebastionay, Apr 16, 2010.

  1. Thanks, what books can you recommend?

    Ive been profitable in equities and blown a micro FX account (100$) due to over leveraging. So i'm not completely oblivious of trading and the risk of cleaning out my own account.

    Ive just been reading this http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337350

    Im just looking for new tools to profit from market inefficiencies and trend following.
     
    #11     Apr 17, 2010
  2. Are you allowed to tell me which broker you use?

    Im not sure about the rules on the forum so just ignore the question if not.
     
    #12     Apr 17, 2010
  3. BartS

    BartS

    All About Options by Thomas A. McCafferty

    Start there....
    Nothing extraordinary, but it goes over basic option strategies, and explains the basics very well....
     
    #13     Apr 17, 2010
  4. Sebastionay:

    You're getting good advice from the responses above.

    1) Read all you can before starting. Any investment that gives you leverage, such as options, is an investment that can be very dangerous as well as potentially quite profitable. Realize that there are substantial risks involved in selling options, also known as "writing" options. Even if it seems like "free money", writing options is inherently dangerous and should be avoided until you really understand options and money management.

    2) If you only have $1000, I'd recommend that you save some money until you have a more substantial amount which you can do while you are reading everything you can find about options. There are many good books, and the CBOE website is also good. Search through elite trader, as well. There are many good posts from experienced and wise people. One of the respondents above, "dagnyt", has given you his website address. He is reputable and knowledgeable. He will also help you to avoid taking stupid risks that you will later regret.

    3) If you see a book or website that promises returns like 10% every month, avoid it like the plague. Getting large returns involves taking large risks.

    4) Finally, start with buying options in very small quantities or paper trading for at least 6 months until you begin to get a feel for what can and does happen to options prices. Options prices are affected by a number of variables such as time to expiry, volatility, and the relation of the strike price to the current price. You need to see them in action for awhile so that you can make better decisions. Option trading is exciting and interesting, but it will be much more rewarding for you financially if you take this advice.
     
    #14     Apr 17, 2010
  5. donnap

    donnap


    There are also ample resources online. I haven't checked in a while - CBOE has good educational resources, I think.

    A little research should do the trick.

    Keep in mind that if you are buying puts or for any option trade, you have the strike, expiry and position size to choose. You should have some idea of what you are getting into when making this selection.
     
    #15     Apr 17, 2010
  6. Coolio

    Coolio

    Thinkorswim has been voted the best option broker in Barrons for a few years and they are friendly to the small timer. Check 'em out.

    You want your per contract commission to be like $1.50 or so .... the brokerages vary wildly and some only get cheap when trading lots of 10. That's sorta like trading 10 futures contract at a shot ... that's big time money.

    Start with 1 lots in a $4000 account or so .. learn the greeks ... they are your key. There are many options startegies and each is appropriate under distinct market conditions.

    That being said ..anyone short puts past wednesday of expiration week deserves to be wiped out ... there was no more theta to burn ..... one should have started rolling/closing on Monday.
     
    #16     Apr 17, 2010
  7. spindr0

    spindr0

    What gave it away? The lack of facial hair or the combustible face?

    :)
     
    #17     Apr 17, 2010
  8. This whole thing is just toooo crazy....
     
    #18     Apr 17, 2010
  9. Thanks for all the great advice guys Im glad I found this forum.

    Ive just been reading options demystified by thomas mccafferty.

    Seemed to be a good choice as there are questions at the end of each section.

    What other good options books are there?
     
    #19     Apr 17, 2010
  10. Carl K

    Carl K