Option Trading

Option Trading is NOT for everyone. Like all leveraged instruments, it is like a double edged sword and can cut both sides, which means it can be extremely profitable or devastatingly damaging. Also, it can be as speculative as conservative as you want it to be, depending on your objectives.

With the internet and the media, there are so much noises. Go to different sources and you will learn different views and advices. For example, if you go to a brokerage house website, it may accentuate the benefits whereas a regulatory body may over emphasize the risk. So, where do I begin, you ask?

“You have to learn the rules of the game. And then you have to play better than anyone else.”

... Albert Einstein

Here are some guidelines:

• Learn all you can about the basics of option trading.

• Start with the most conservative option trade, slowly progresses to other strategies.

• Do paper trading first if you prefer to be on the safe side.

• Start with small position, gradually increases your trade size. Trade only with money that you can afford to set aside; Never, ever trade with monies that you need to put food on the table, pay rent or your house installment.

Some friendly advices:

• Risk management. First and foremost, you must understand and establish the kind of risk you are exposing yourself when doing trading.

• Cut-Losses. In contrast to real estate, where the 3 major factors are: Location, Location, Location; In trading, they are: Cut-Losses, Cut-Losses, Cut-Losses.

• Averaging. Never, ever average down when you have a losing position.

• Diversification. Instead of putting all your eggs into one basket, spread out your risk over a number of positions or even staggered timing in taking up positions.

• Let Winners Run. Be extremely patient with your winning positions.

• KISS - Keep it Simple and Sweet, ie. Keep your trading system simple.

Option Trading Characteristics - Its nature and risk management.
Futures Options - An Overview of Futures and Futures Option Trading .
Commodities Options - An Overview of Commodities Options.
Commodity Broker - How to choose the right person for you?
Covered Call Writing - The strategy to enhance returns when you already own the underlying stocks.
Online Stock Option Trading - Having the proper tools and information to be successful in your trading.
Explanation of Put and Call Option - Explanation of Put and Call Option with Examples.
Option Trading Strategy - The Long Straddle - A Description Of Long Straddle As An Option Trading Strategy
The Short Straddle - A Description Of Short Straddle As An Option Trading Strategy
 

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