Hi, I am relitavely new to options trading. I had a few questions I wanted to ask, hope someone can help me. Now I have a Ameritrade account, I recently upgraded it to allow options trading. It says you can write covered calls and purchase options without a margin account. I don't have a margin account currently. Now here is my question. I want to buy calls/puts and sell them to make profit. Will my account able to do this? It says I can't create spreads, and write uncovered options with cash accounts. Please let me know. Thanks.
nirav, I use InteractiveBrokers, not Ameritrade. However, it should not be a problem for you to buy the puts and calls outright and then sell them. You probably would not be able to sell options short. Hope this helps. Steve Rosenbaum http://www.options-trading-resources.com/EliteTrSig Option Trading tools the pros wish they had! A former Chicago Mercantile Exchange employee reviews stock option trading software, books, and web sites and online income opportunity.
I am not familiar with Ameritrade, but have used and still do use Scottrade for one of my accounts. I assume they are pretty similar in their allowances. you're probably not permitted to do any naked options plays, but you will be allowed to write covered calls and purchase calls and puts outright. This is a good thing since you self-admitted that you're new to options. Even with the account's limitations you still have some very good options strategies at your disposal. Get yourself a solid options book like "McMillan on Options" or even "The Options Strategist" and start reading. Familiarize yourself with a couple of basic options strategies that you will be allowed to do like covered calls, strangles and straddles. If you think options are something you would like to try, then dedicate a portion of your account to trying them. A very easy way to start with options is just read about protective puts and covered calls. Try those strategies on some stock you already own. Observe how the options react to price movement over time, and keep reading. If you become successful, you will know when the time is right to obtain margin privileges. The learning curve in options can be as painful or rewarding as you want to make it. I strongly suggest crawling before running with options. (Just my humble opinion of course) I started with options may moons ago by just using them to hedge my stock positions at the time. This is a good way to get started, and that Ameritrade account of yours probably allows you to do enough to get your feet wet as well as enough to hang yourself. So, read a little and trade a little. Analyze your results A LOT! Welcome to the world of options. Whether you're successful or not lies within yourself and your abilities, as well as your passion to find out. Good Luck!
Buying options - yes, selling them to make profit after roundtrip commissions as high as $23.48 per contract :eek: - not likely.
Thanks guys, really apperciate the feedback. I just want to get my feet wet, in the market. I am a Finance studnet currently finishing up trasnfer work at a community college. I have started trading stocks for well over a year now, was told to stay away from options when I first got into market. Now that I have learned what options are and what they can do, I LOVE IT! I hope to work with all of you, thanks again.
You should listen to that advice until you are consistently and strongly profitable in trading the underlying stocks.
I have one question. Let's say MSFT went up 1.50 before market opens, will the option price change before the market opens? Can I buy the option for prev close price when the market opens? Thanks.
I suggest you buy some books and start reading. Your answers lie in those pages. I'm not trying to be condescending. I'm just trying to help, but sometimes self-help is the best.
LOL!!!! Yep, you just jump in your time machine and go back to yesterday's close. Pick up a call, and you're in business.