Trade Stock Options
How to Trade Stock Options
By Maujhuri Chakraborty
There is a lot of information available on the web regarding options and the development of online brokerages. And the basics about how to trade stock options are not tough to learn. You need to control your emotions and exercise good money management to succeed in trading options to begin.
When you own the stock or shares of a company then you actually own a piece of the company. An option is an agreement or contract in which one party agrees to deliver something to another party within a specific time period and for a specific price. The option is a contract that allows you to purchase or sell 100 shares of stock at a specific price on a specific date.
There are two types of options, which are called puts and calls. The call option gives you the right but not the obligation to purchase a stock at the strike price before the option expires and the put option gives you the right but not the obligation to sell a stock at the strike price any time before the expiration date.
How to trade stock options is a popular field because they can help you to get more bangs for your buck. Instead of buying a stock outright, you can enter into an options contact, which can be cheaper but have the same, if not better, results. Trading stock options is for those who are comfortable with risk and management positions.
When individuals sell options, they create a security that did not exist before. This is known as writing of an option and explains one of the main sources of options since neither of the associated companies exchange issues options. When you write a call, you may be obligated to sell shares at the strike price any time before the expiration date. When you write a put, you may be obligated to buy shares at the strike price any time before expiration.
Here is more about how to trade stock options.
o Options are less risky than holding stocks but this is always not the case. If you plan to trade options at some point make sure that you understand fully the risk and downside of each trade.
o Options take more attention and can amplify the movement of a stock in your favor or out of your favor quickly.
o Stock options trading requires you to understand the market, having an edge and executing a plan.
o Stock options have an expiration date so you can exercise your options starting on a certain date and ending on a certain date. If you do not exercise them in this period then you lose them.
Stock options are good investments and many companies offer employee stock options as incentive for loyalty and also to attract new employees. The stock options are bought at the strike price or the grant price that is discounted. Since the companies allow specific times to exercise the stocks, the prices are likely to go up and hence the holder can make a profit.
Join many other successful people who invest regularly and make profits. Learn more about how to buy stock [http://www.howtobuystock.org] and earn your fair share too!
Options Trading - Trading Stock Options Can Be Broken Down Into These 7 Simple Steps
By Travis W
Options trading has, for years, enticed and seduced many people into learning about this relatively unknown form of investing. Stock options are gaining popularity, but the mass population is still not fully aware of their existence. Now that I've experienced my own 300% returns on my money, I've set out to tell the world about options trading.
The first lesson I will share with you is that when you tell people you're learning how to trade stock options, their responses will vary. Some will have a vague idea, or think you're talking about employee stock options. A large majority will tell you that options trading is risky and should be avoided.
Don't take it personally. They're just looking out for your best interest.
Many people discouraged me from learning how to trade stock options. I'm glad I didn't listen because trading stock options has changed my financial future for the better. Learning how to trade stock options was a struggle at first, but over the years I've managed to break options trading down into 7 simple steps.
I'm not the original author of the 7 steps, but I have noticed that all successful options traders follow them. Here are the seven steps:
7 Step Process of Trading Stock Options
Finding Hot Stocks: let's face it, finding hot stocks that are ready to explode is what every trader is looking for. Combine that explosive price movement with the potential gains of stock options and you have a winning combination.
This crucial first step builds the foundation of a successful trading business. You can't find quality trades on a consistent basis unless you have quality stocks that produce these trades. I use the Investors Business Daily to find my stocks. They've created their own proprietary formula for finding the best stocks. Feel free to check them out at www.investors.com.
Creating Your Watch List: your watch list is like your pot of gold. It will overflow with endless trading opportunities. This list is your 50-100 best stocks. Your going to review the stock charts each night, or week, looking for potential option trades.
Using Technical Analysis to Find Trades: At this point in the trading process you're going to use technical indicators to evaluate the stocks on your watch list. You're looking for chart patterns and trade entry signals.
Creating Your Hot List: If you found a stock that has signaled for a trade entry, you place it on your hot list. This is the list of stocks that you're ready to commit money to. You pull up the option chain and you pre-select the options you're going to buy. You then wait until the next trading today.
Observing the Stocks Follow Through: Did the stock continue in the desired direction? This is considered follow through. After you've found a trade, you want the stock to continue in the desired direction. If it does, you enter the trade. You're going to use 1 of 4 option trading strategies that you can learn about at www.swing-trading-options.com.
Planning Your Exit Strategy: why is it that every hotel you stay in has an exit plan? Because they are preparing for the unknown. Trading stock options involves far too many variables beyond your control. You must have an exit strategy planned out before you enter a trade. It's a way to manage risk. It's like buying car insurance. You're protecting yourself in the event of an accident.
Using Smart Money Management Rules: there's only one way I know to get rich with options trading and that is to make more money than you lose. In order to do that you have to have a set of rules that will prevent total financial disaster. Don't forget this crucial last step.
If you've been struggling to make money in the market, these seven steps can help you find your way to profitable territory. If you want to see my actual trade results from following these simple steps go to http://www.learn-stock-options-trading.com/.
I've designed a web based options trading course that guides you through an easy way to learn online options trading. I "share" my option trading tips, techniques, and strategies with you instead of "selling" them to you.