Fundamental Options Trading Course
The Two Most Important Rules of Trading Options
1. Options expire.
2. Protect capital.
Write these down, do whatever you have to but above all else remember these two simple rules!
But I’m getting ahead of myself…
Lets bust up some common myths about options to get us started.
Options are too risky and they should be avoided.
This is true and false. Options are inherently risky because they’re leveraged products and they expire. So yes, trading the wrong way can cost you dearly. However, with a proper education and a complete understanding this can be thrown out the window. It will no longer apply.
*Note: Options were originally designed to manage the risks associated with stock investing.
Options should only be traded by professionals with years of training.
Nope! This is absolutely not true. Options can and should be traded by anyone interested, so long as it’s understood there are rights and obligations that apply.
Trading is a “Rigged” game.
To this I say maybe, and, it PROBABLY is! Honestly though I don’t care, because I realize that in any business the overarching goal is to gain an edge over the competition (That’s how businesses survive in a competitive economy and finance or trading is absolutely a business). Keeping it legal, I would do the same and I believe most would also.
In time you’ll develop your own opinions on the matter but my thoughts are simple. You can either get in the water or sit beside the pool. Either way someone is swimming (making money) and why can’t that be us.
Options are a novelty investment nobody uses.
Well this simply isn’t true, just take a look at the image below. Not only are options being traded they’re being traded heavily and increasing over the years. Data taken from the Options Clearing Corporation.
Click to Enlarge.
Lets proceed to the terminology section…