How To Trade Options, Without Losing Your Shirt
Trading options, can be, contrary to popular belief, less risky than stocks.
The problem is most people have no clue how to trade options correctly. You can be ultra risky with options trading, or you can really hedge your risk effectively. That’s what’s really cool about options trading. No matter what type of investor you are, or what type of risk level you want to take, there is an options strategy for you.
Options Basics
The two types of options are: calls and puts
Purchasing calls is like going long in a stock. You want the stock to rise if you buy calls on that stock.
Purchasing puts is like shorting a stock. You want the stock to fall for you to make money.
Here’s where it gets a little complicated.
Just like with a stock trade, there are always two parties involved in an options contract. In options, their are the writers of calls and puts (sellers), and the holders of calls and puts (buyers). Basic options trading involves being the holder (buyer) of options contracts. Writing options is a more advanced trading strategy.
Options Participants
So, now that you know their are two parties on both call and put options, you can deduce that the four types of participants are:
- buyers of calls
- sellers of calls <– advanced
- buyers of puts
- sellers of puts <— advanced
How To Trade Options
To trade options, you must work with a broker who handles options contracts. You must also meet certain investor requirement, as options trading is risky.
Hands down, without a doubt, the place place to learn about options trading, and also the best options broker is OptionsXpress. I’ve had an account with them since 2001 and they have never disappointed me in my options trading. Their fees are low, trade execution excellent, and their options education that is open to account holders is second to none.
For general stock trading, go with Zecco.
Click HERE to open an account online at OptionsXpress. The minimum to open an account is only $0. Yep, no minimum deposit is required.
