Education in Options Trading
Options are contracts to buy or sell an underlying security at a set price until a specified expiration date. The flexibility of options and the host of different trading strategies that have been developed allow traders to engage in conservative or aggressive trades that can provide profits in rising, falling or neutral markets. Some very good sources for option trading education are available.
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Resources
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Start learning about options with the excellent, free resources available online. The options learning centers at the Chicago Board Options Exchange (CBOE) and the Options Industry Council (OIC) websites offer a broad range of free tutorials, courses and webcasts. The OIC is also a good source for live seminars in your area.
The online brokers that specialize in option trading offer a lot of educational material. Trade King, Trade Monster and OptionXpress are options-oriented brokers that make their educational material available without requiring you to have an account.
Learning Plan
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Options trading has its own set of functions and terminology. First, learn the basics of how put and call options work. As you study options trading, the unique vocabulary should become ingrained knowledge. Start to watch the options prices of some stocks that interest you, and achieve an understanding of how option prices change as the underlying security changes in value.
Once you have a feel for the options basics, start studying the different strategies. Learn which strategies are appropriate for aggressive or conservative trading. Study which strategies will produce profits in rising, falling or neutral markets. As you learn the strategies, pick out the ones that are a fit for your investing mentality and financial resources.
Practice strategies
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The Options Industry Council and CBOE both offer virtual trading platforms that allow you to test options strategies with real option prices in real time. Use the virtual trading systems to become familiar with all the possible outcomes of the option strategies you would like to use. Do not rush into options trading with real money. Strategies that look good in the educational material may not perform as you expect in the world of real time bid-ask spreads with commissions included.
When you are comfortable with the possible outcomes of your selected options trading strategies, open an account with an online options broker and start earning some profits.
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