hello all. I have spent many hours in the past few days reading over this forum and any other related materials I could get my hands on. I am one year out from graduating college and I am planning to trade full time. As of now I would like to focus on options. Could anyone leave me a little advice for a beginner and/or the major pros/cons of option trading. Just looking for any more info before i set up a system and papertrade a little.
Go to www.888options.com and order their free educational material. Learn it. It's a great start. Next, get a copy of Natenburg's "Option Volatility and Pricing" and read it 2-3 times until you start to grasp the Greeks. He highlights delta-neutral trading in there, but don't get too excited about it if you're going to be a retail trader. The costs are typically too high to do that. But overall it's a good book and a must read for options traders
Beware, because while option trading can often be very prudent, statistics show a high percentage of new option traders lose all their money quickly. If you think you came up with a good strategy, and are about to implement it, start small, like 1 option contract (literally), and wait it out. 2) If the option play looks too good to be true, 99% for sure it is too good to be true, 3) I would be very cautious above calendar spreads and selling straddles 4) I would subscribe to a service that will give you a directional feel for the market and trade QQQQ or credit spreads (choosing from bear or bull, puts or calls). If you send me a private message I have an insight for you regarding same.
Just curious how you go from graduating from college to trading full time. Do you have a large sum of capital coming to you on graduation? If you do, be careful about putting it all at risk with options. Options have a steeper learning curve than stocks. If you do not have a firm grasp of the market and stocks, then options is starting with calculus to learn math. If you have never traded stocks before or followed the stock market, then starting in options is most likely a losing proposition even if you could grasp option pricing, greeks, strategies and applications. Not to dissuade you but just to let reality sink in. One cannot walk out of college never trading anything and expect to do well starting in options. Are you planning on working full-time as well? Are you using money you can afford to lose? Can you survive the inevitable drawdown all beginner traders are likely to face again and again? Just want to make sure you are looking at this realistically and not idealistically as a glamourous event. Trading will be harder than you ever expected but if you put your head down and attack it and take the time and effort to learn it and respect the market, it is very rewarding.
hey option coach...thanks for the advice and i understand your worries for a beginner. I am majoring in finance and entreprenuership...simply because I enjoy investing (which i do have a background in since i was twelve years old, however not an active daily background) and have the personality type that enjoys challenges, accepts risks, etc... as far as a large sum of money, i have a "sum" of money which is set aside as capital with 100% risk, whether to start a business or trade with...as of now it is around 15k. I do not have the intention of exiting college and entering full time trading in the same step;however, full-time trading is my goal. I have just begun reading 4 different books which i picked up at my school's library...mostly basic to intermediate texts soley focused on options. I am aware of the challenge of options (not knowledgable ok all the skill sets yet) and seem to prefer the opportunities in option trading over other types. Again thanks for all the feedback! I look forward to becoming part of ET's community.
Futures are the way to go for a off the floor trader. Options are for floor traders not screen traders. PERIOD!!!!! Many options traders sooner or later move over to futures, that means that unless you are on the floor of options exchange you are in trouble. Why not start on the road most traveled, seems like a better choice from the start. My question has always been; What is the lure of options trading? O'sure they say the losses are defined, but if proper risk management rules are used, losses are 99% defined in anything. Check this out, unless you take out a loan with your bookie, your losses are 100% defined....
I can't tell you much about futures, but IF you know what you're doing, equity options can be very profitable.