John Marston-Is Day Trading Stock Options A Bad Strategy?

Most people will tell you that day trading stock options is extremely risky and shouldn’t be attempted by new traders. And they are right, to an extent. Trading options can be risky even for professional traders with 20 years experience.

However, trading stock options can be a great way to leverage your investment. For a small fee, with a defined risk, you can control a large amount of stock. The primary thing to remember, options are a wasting asset. When expiration Friday arrives, the option expires. If the option is in the money, you can either use it purchase the stock or redeem the option for the premium value. If the option expires out of the money, you have lost your investment.

Most people try to guess which direction the market is going to move, will it go up or will it go down. If they guess wrong, they lose money. More people trade with call options instead of put options, because they understand going long on the market but do not understand going short.

The vast majority of traders do not utilize trading strategies such as straddles or strangles, much less condors or butterflies. As a result, they are taking on a lot more risk, with less chance of making a profit.

If the beginning trader would take the time to learn some of the various trading strategies, they would greatly decrease their risk and improve the odds of having winning trades tremendously.

Learning the complex option trading strategies is not that hard. First you learn about the simple puts and calls options. When you understand the basic building blocks, you move on to combining the various strike prices and expiration dates. Even the most complex stock option trading strategy is made up of simple puts and calls.

These strategies will reduce the risk to a much lower level. The down side to these trades is you lower the return on the trade. But if the trade goes bad, the strategy will minimize your loss. If you still have money, you can still keep trading. If you lose all of your capital, you are out of the game.

So the people that say day trading stock options is risky are correct. But if you take these simple steps, then you can lower the risk, and still maintain the leverage that trading options will provide.

Stock Options Trading Explained By Benjamin Wise

New and small investors alike can easily get involved in stock options trading. Nevertheless there are many pitfalls and questions that need to be asked regarding options trading. If you are just getting started with options trading, you might at this point feel a bit overwhelmed. This is especially so since there are many choices with options and a multitude of ways to trade these same options.

To start trading it is advised that you have at least a minimum capital of US$5,000 to trade options. Then it is essential that you practice good money management with this capital.

For instance, if you allocate only 5% of your trading capital on every trade and you happen to lose 3 trades in a row, you would have lost 15% of your capital & still have 85% of your capital left.

The lower you traded down your capital, the higher the percentage of gain you have to achieve in order to recover your trading capital.

Here is a stock options trading tip. As stocks near the ends of their quiet periods, they tend to steadily rise in price in anticipation of the `strong buy` recommendations most will receive from their underwriters after the quiet period ends.

When learning about options trading, it is important to familiarize yourself with all the different types of options contracts that are available.

Stock and option traders that take the time to learn and apply a few simple strategies that are available through options put themselves in a better position to assess risks in the markets and potentially put themselves into positions to profit substantially.

Stock Options Trading By Micheal James

Stock options trading are profitable way of investing in stocks. It is just like you buy stocks in the stock market with some difference. In stock options trading, you buy option contracts instead of stocks. In option trading, you have to buy the stocks in a lot instead of buying them as separate shares. In most cases one lot in option trading comprises of 100 stocks. The contract of the option trading expires over a period of time and there are different time period for one particular stock option as well. You need to choose the right stock option depending on your investment strategy and considering the contract expiry dates and strike price of the particular option. There are certain advantages and disadvantages of trading in stock options.

The biggest advantage of option trading is that you can gain significantly by trading in the option contracts while investing relatively less money. For example you are targeting to buy 1000 stocks of a company. If you buy the stocks in cash segment you have to pay the full price of the stock, i.e. 1000 x current price of the stock, whereas, if you buy 1000 stocks in the option exchange, you need to buy only 10 option contracts. That means you are paying only 10% of what you had to pay in the cash segment. This is one distinctive advantage as you are getting huge number of stocks buy investing significantly less amount of money.

But while doing stock options trading you must be careful about the expiration date of the contract. Remember you have to sell off the option contracts within that period of time whether you make loss or profit. This is one limitation of trading in the options. But if you be particular about the investment and plan your option trading diligently, you can make profit even when the stock is not moving at all. As we have already mentioned that there are different periods available for option contracts of a particular stock. So you have the freedom of buying the option contract according to your investment schedule.

Whether you are trading in the cash segment or in the options, the basic principal remains the same. You need to have extensive information, have a close watch on the trend of the market and take timely decisions for buying and selling stocks. You can also take help from the stock analysts who provide regular guidance on the stock picks.