10 Profit-Maximizing Tips For Beginners In Online Options Trading

Options trading is the buying or selling of the contract right to buy or sell a stock, bond, commodity or another market tradable item

by Press Office

(SEOSamba and WireNews+Co) - New York, NY - 25 October 2012

It differs from a standard stock trade in that it is not dependent on the stock going up for the investor to make money. Fundamentally, there are two types of options that an investor can purchase: a put and a call. A call option gives the investor the right (not the obligation) to purchase stock at certain price within a certain period of time. A put option gives the investor the right (not the obligation) to sell stock at a certain price within a certain period of time. The idea is to be right about it going up or down, and then make money on the spread.

With a call, you buy the excess shares at the lower price knowing you can turn them for resale at the higher price with your option. With a put, you sell the shares at the higher contract price while safe with the knowledge you load up on shares at the lower market price for your profitable resale.

The advent of the internet has given increased power for the individual to profit instantly by his/her own hand. It also has increased the risks inherent in people thinking they know more than they actually do. This is definitely a downside of the easy access the internet provides traders. Here are 10 points that may help you as a beginner to speed up and hopefully outright avoid the potentially expensive learning curve common to options investing online.

1. Don’t neglect the learning process necessary to analyze stocks and the fundamentals that go into why they go up and down. A tendency for beginner options traders is to not be disciplined in their financial education. A bad stock trader is normally also a bad options trader

2. Ground yourself in regular reading about stocks, particularly fundamental value investing. Warren Buffett is one of the masters of this analysis. When you feel you have a good handle on those concepts, begin to study market trend investing aka technical investing. This is investing that focuses on the larger market trends and the effect of those trends on different stocks and places less emphasis on the internal aspects of a particular company

3. Start out simply and at a conservative slow pace. Having massive early success can lead to a dangerous invincibility complex. Getting blown out of the water can lead to a quick end to an otherwise promising investing career.

4. Bring some money to the game. Options trading (https://www.mytrack.com) can move quickly and gobble up your capital in an instant (literally). Experts often recommend the 10 and 10 rule. Minimum 10,000 cash and that cash should be no more than 10% of your total investment and liquidity base.

5. Have enough knowledge and exercise enough patience to make sure you have a hedge on your early trading. Invest in a way that increases your odds to leave you on solid footing with one investment that stands to go up in value, if another related investment fails. This goes back to having real knowledge that you earn through serious study.

6. Know the lingo. Options trading is like quarterbacking a football team. You have to know the plays but you also must know how they are called and be able to recall it fast. In many cases, opportunities are gained and lost in an instant. Stay immersed in reading a half-hour a day or more about the topic of Options investing and you will absorb the lingo.

7. Attend an options trading seminar in a live setting with other students at least once every 6 months. The cost of a good education is always cheaper than the cost of not having one.

8. In the beginning, don’t be in the position of selling options. Stick to buying puts (the right to sell stock) or calls (the right to buy stock). Selling of the option itself is advanced and too risky for a beginner.

9. Seek to invest early on things you understand and have an interest in. The greatest effort in life is usually expended towards things that grab us emotionally. You’ll do more homework and be more engaged in a stock sector that interests you.

10. Get on a mailing list for option advice that provides you with access to tools for valuating options before you make your first trade. Here you have a win-win. You get free tips to your email inbox you can read over morning coffee and you get a tool to help you with your first option purchases. Consider such tools training wheels to insure you’ll stay up when the wheels come off.

TDSC (the broker dealer) does not offer any trading advice and we are not an investment advisor.  The above is intended as informational in nature. It is not intended to be trading advice. Some stock market tips (http://stocknews.theflyonthewall.com) are provided by The Fly on the Wall.

About MyTrack
Track Data Corporation is a financial services company that provides direct access brokerage, real-time financial market data, news, and research to institutional and individual investors through dedicated telecommunication lines and the Internet. Founded in 1981, Track Data is a company based in New York City. More information about MyTrack can be found online at https://www.mytrack.com (https://www.mytrack.com). All trading is done through Track Data Securities Corp., member FINRA/SIPC/NFA, a wholly owned subsidiary of Track Data Corporation.