How To Trade Stock Options (Ultimate Beginners Guide)

[jpmartin]

If you're interested in stock option trading, here's a good beginners guide to get you started. Covers the basics, plus four simple strategies to get started

 

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[MJ DeMarco]

Another great resource for the absolute beginner is Step Up to Options...

https://www.dough.com/stock-options-explained

I will expand on this at a later date/post (And @IceCreamKid as well) but options are truly the one financial investment that fits a Fastlane modality. At some point on your financial journey, you should learn the right way to trade them. And yes, there is a right way, and a wrong way.

 

[jpmartin]

there is a right way, and a wrong way.

Without an ounce of doubt!!! btw, that article also leads you to dough.com - excellent resource, that has another advantage of getting you approved for options trading with ThinkOrSwim / TD Ameritrade.

 

[IceCreamKid]

Another great resource for the absolute beginner is Step Up to Options...

https://www.dough.com/stock-options-explained

I will expand on this at a later date/post (And @IceCreamKid as well) but options are truly the one financial investment that fits a Fastlane modality. At some point on your financial journey, you should learn the right way to trade them. And yes, there is a right way, and a wrong way.

Very excited to be sharing some knowledge and experiences on this topic in the future. I've been dying to share some of this stuff with people who are actually interested.

 

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[jpmartin]

Very excited to be sharing some knowledge and experiences on this topic in the future. I've been dying to share some of this stuff with people who are actually interested.

We're all ears!

 

[jpmartin]

options are truly the one financial investment that fits a Fastlane modality.

MJ, would be really great to read your post on this, particularly how it ties with the CENTS = Control, Entry, Need, Time, Scale framework. (sorry, had to twist that around).

 

[MJ DeMarco]

MJ, would be really great to read your post on this

I promise I will be making a huge post on it in the near future. Just gathering some more trench experience and waiting for the year to end.

Also, the post will NOT be outside for public consumption-- it will be made on the INSIDE. I got a good suspicion that @IceCreamKid will be a legendary contributor to it as well. Stay tuned!

 

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[Daniel A]

I'm seriously looking forward to this! The 3-day Rich Dad event I went to long ago was about stock options and regrettably my interest in that died off, but now it's been reignited! I was just signing up for dough.com, but it said the email was taken. I knew it seemed familiar because I'd already made an account. This is another reason to get INSIDERS once again...

Ditto on my bolded text above. ^

 

[AllenCrawley]

It's been 15 years since I actively traded stock options. I really enjoyed it. Looking forward to this as I'm sure it will be a great refresher and I bet I'll learn a ton as well.

 

[exclusives88]

I also look forward to this.

I traded options in 2013 and 2014. I was super risky, trading calls/puts or straddles on earning days where premiums were crazy high due to its volatility. Let's say that I lost a lot of money! I'd like to learn as how I was investing was the WRONG way!

 

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[Chitown]

If you're interested in stock option trading, here's a good beginners guide to get you started.

@jpmartin,

Bookmarked! Thanks for the link! Very interesting reading. Brings back memories of watching the options traders in the meat complex at the Merc in Chicago.

 

[jpmartin]

@jpmartin,

Bookmarked! Thanks for the link! Very interesting reading. Brings back memories of watching the options traders in the meat complex at the Merc in Chicago.

Chicago is where it all began...!

 

[Chitown]

https://www.dough.com/stock-options-explained

I will expand on this at a later date/post (And @IceCreamKid as well) but options are truly the one financial investment that fits a Fastlane modality. At some point on your financial journey, you should learn the right way to trade them. And yes, there is a right way, and a wrong way.

@MJ DeMarco,

Bookmarked! Those videos look tight. Looking forward to what you and @IceCreamKid are cooking up. Thanks, fellas!

 

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[Chitown]

Chicago is where it all began...!

For about 7 months in 2005 I was a runner and out trade clerk for R.J. O'Brien, one of the founding market makers of the Merc in 1914, I believe. It was called the Butter and Egg Exchange, then. I left one week before that nasty Refco scandal in late '05.

Glad I got the hell out when I did. Doing out trades would have been a frickin' nightmare!

 

[Kevind88]

I've been studying options trading. I've read a few books and Sheldon Natenberg's book is my favourite. I watched videos from tastytrade site, however, I am a little skeptical about their trading strategies and risk management techniques. I am looking for other learning sources, your recommendation would be greatly appreciated.

 

[jpmartin]

I am looking for other learning sources, your recommendation would be greatly appreciated.

Try going through the link given...

 

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[IceCreamKid]

I am a little skeptical about their trading strategies and risk management techniques. I am looking for other learning sources, your recommendation would be greatly appreciated.

I can tell you from experience that reading another book will not give you the feeling of confidence which you seek. It will just lead you down the rabbit hole of analysis paralysis.

For me, the biggest confidence booster has been:
1. trading in real-time
2. using the ThinkBack feature in ThinkorSwim to allow me to manually backtest my strategies.

I invite you to test the strategies that you learned from TastyTrade using the ThinkBack feature. I think you'll be pleasantly surprised at how effective their strategies are. A consistent 20-40% profit per year is very realistic utilizing their strategies.

Also make sure to test your strategy in a variety of market types. It's important to learn when to use the proper cashflow strategy.

• Clear trending markets=directional trading(delta trading)
• Choppy markets=time decay trading(theta trading)
• Volatile markets=volatility trading(vega trading)

Historically, the market goes sideways the majority of the time so ideally you will be selling theta and profiting from time decay. Stay away from covered calls. Not enough control in those and when things get ugly, they get UGLY.

Sign up for a free account at https://www.dough.com/#traders and observe their trades in real-time. You'll learn a lot about how to adjust trades to profitability in the event that the market moves against you.

 

[Kevind88]

I can tell you from experience that reading another book will not give you the feeling of confidence which you seek. It will just lead you down the rabbit hole of analysis paralysis.

For me, the biggest confidence booster has been:
1. trading in real-time
2. using the ThinkBack feature in ThinkorSwim to allow me to manually backtest my strategies.

I invite you to test the strategies that you learned from TastyTrade using the ThinkBack feature. I think you'll be pleasantly surprised at how effective their strategies are. A consistent 20-40% profit per year is very realistic utilizing their strategies.

Also make sure to test your strategy in a variety of market types. It's important to learn when to use the proper cashflow strategy.

• Clear trending markets=directional trading(delta trading)
• Choppy markets=time decay trading(theta trading)
• Volatile markets=volatility trading(vega trading)

Historically, the market goes sideways the majority of the time so ideally you will be selling theta and profiting from time decay. Stay away from covered calls. Not enough control in those and when things get ugly, they get UGLY.

Sign up for a free account at https://www.dough.com/#traders and observe their trades in real-time. You'll learn a lot about how to adjust trades to profitability in the event that the market moves against you.

Thanks for the advice. I was paper trading using ThinkorSwim but didn't know about the Thinkback feature. Will definitely test it out.

 

[Kevind88]

I promise I will be making a huge post on it in the near future. Just gathering some more trench experience and waiting for the year to end.

Also, the post will NOT be outside for public consumption-- it will be made on the INSIDE. I got a good suspicion that @IceCreamKid will be a legendary contributor to it as well. Stay tuned!

Any updates on your options post MJ?

 

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[Captain Jack]

Any updates on your options post MJ?

There are MANY MANY updates on this. Purchase an INSIDERS subscription for further details.

Seriously. There are multiple very active threads that will tell you everything you need to know to successfully trade options.

 

[MJ DeMarco]

Any updates on your options post MJ?

Yes, I made an extensive thread on the INSIDE, which I plan to update for awhile. That thread also morphed 3 other threads on the inside. All contain contributions from myself and @IceCreamKid who alluded in several threads that he also trades options.

 

[Kevind88]

There are MANY MANY updates on this. Purchase an INSIDERS subscription for further details.

Seriously. There are multiple very active threads that will tell you everything you need to know to successfully trade options.

Will do, thanks MJ!

 

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[Kevind88]

Yes, I made an extensive thread on the INSIDE, which I plan to update for awhile. That thread also morphed 3 other threads on the inside. All contain contributions from myself and @IceCreamKid who alluded in several threads that he also trades options.

Thanks MJ, will join Fastlane INSIDERS today

 

[jpmartin]

I will expand on this at a later date/post

Did I miss this?

 

[MJ DeMarco]

Did I miss this?

I tagged you in the INSIDERS thread ... it's called "How to Print Money Like the Worlds' Billionaires."

 

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[mosdef]

When Reading this thread https://www.thefastlaneforum.com/community/threads/is-the-stock-market-a-good-fastlane-road.59175/

people didnt seem to positive ab out trading stocks. So what are the difference between trading stocks and trading options?

I'm going to do some research!

 

[jpmartin]

people didnt seem to positive

Depends on which stage of the market cycle they were on

 

[MJ DeMarco]

people didnt seem to positive ab out trading stocks.

Stocks are like playing war.

Options are like playing poker.

At the very instant you buy a stock, your chances of being profitable is a coin flip -- 50/50. This statistical probability holds NO MATTER what the technical charts say, or the fundamentals.

If you buy 10 stocks, your odds of being profitable on every one of them is .5 to the 10th power or .097% -- and this is how the world invests for their retirement.

When using the market, the Fastlane preference is options due to time decay, which is essentially is finance world's version of the commandment of time.

 

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[mosdef]

Stocks are like playing war.

Options are like playing poker.

At the very instant you buy a stock, your chances of being profitable is a coin flip -- 50/50. This statistical probability holds NO MATTER what the technical charts say, or the fundamentals.

If you buy 10 stocks, your odds of being profitable on every one of them is .5 to the 10th power or .097% -- and this is how the world invests for their retirement.

When using the market, the Fastlane preference is options due to time decay, which is essentially is finance world's version of the commandment of time.

oh ok thanks! This means stocks is out of the question. The question is if its worth to spend time learning options

 

[jpmartin]

Stocks are like playing war.

Options are like playing poker.

Love that example, gonna steal it next time!