trade options successfully

Options trading is not something truly productive. It’s a zero-sum game in which the Options Clearing Corporation profits most from commissions. What value are you creating (not transferring) by speculating trends?

!!

I see a few way too general comments about trading options here that are false.

First off, you do not rely on hunches or luck. Second, trading options requires little time. It’s the education for it that takes a lot of time. Also, options do not magnify the stock’s movement—an options movement as related to the underlying stock price does yield higher returns or losses, but the term magnify is very misleading.

The fact of the matter is, options can get you hundreds to thousands of dollars regularly if you traded consistently. It doesn’t depend on luck at all.

It depends on whether you’re diligent about doing your fundamental and technical analysis with stocks.

Options can help you profit whether the stock moves up, down or sideways. It can help you profit if it moves up OR down with 1 position even.

There are many strategies and ways to profit from this. It is a lot easier than starting a business or investing in real estate. It is an important skill to have if you want to increase your income for wealth or just some cashflow.

Bottom line, get some basic education on options and stock analysis. Do it lightly. You can start with as low as $300 and make around $200 a month. That sort of return is not unusual. Expect returns from 10-60% if you’re relatively new, successful and DILIGENT with your trading.

Remember, the trend is your friend and don’t trade on hot tips and emotion. Happy trading.

PS – Having “more important things to do than count money” coming from a person who is on a goal oriented site and subscribed to a goal about making money is not a true sign of wealth.

no time now… I’ve got more important things to do than count money (is that a true sign of wealth?)

Options are very versatile. Not just a speculative tool, but also a hedge.

Just wanted to share a tip for today. AAPL is a prime covered call target today. And you still have a couple hours to get this trade in.

I just bought a chunk of AAPL at $74.51 and within seconds turned around and sold the January $75 call on that block for $5.00 per share. Yes, I’m certain the stock will get yanked from me. Do I care? Hell no! I just turned something to effect of 6.7% in timeframe of less than 1.5 months. (On money that wasn’t even mine to begin with—hence my conservative strat.)

I think if you study the historical data across stocks you will find 2 things about covered calls:

1. Option premiums are optimized with around 1.5 months of remaining duration.

2. Option premiums are also optimized when the stock price is AT or NEAR the strike price.

This info may also be of use to those of you buying and selling options using other strategies.

PS—Read MacMillan. It’s well-worth it.

I started studying options about eight months ago and I have to say that options are the perfect speculative instrument. I’ve always had a hunch about which direction certain stocks are going to go but I’ve never really had enough money to place the big bets and profit largely off of them them.

Options magnify the effect of rises and falls in stock. So for a fraction of the share price, you can bet on the direction of a stock and be rewarded greatly for being correct or punished severely for being wrong. However, you’re only putting up a fraction of the money that you would if you were buying the stock. If you’re smart and you don’t put all your money into one option (which would be stupid), you can manage your risk.

I’ve come up with 5 rules for trading options. They are:

1) Buy your option at least 6 months into the future.

2) Buy your option when as close to the stock price as you can possibly afford.

3) Be aware that you run the risk of losing EVERYTHING that you put into an option and act accordingly.

4) Don’t put all of your money into a single option.

4a) Don’t pump as much money into an option as you would a stock. Stocks don’t expire, options do.

5) Be right (or lucky) at least ONCE between the time you buy the option and the time the option expires.

5a) Know when you’re right. If you hit a homerun on an option, sell it and move on. A missed opportunity to sell an option can prove deadly.

Here’s a great book to get you started. This is the seminal work on options trading by Lawrence McMillan:

http://www.amazon.com/exec/obidos/tg/detail/-/0735201978/qid=1121955621/sr=1-1/ref=sr_1_1/102-8984760-2245710?v=glance&s=books