Some option traders are on the fence about whether or not to adopt a course in trading options. Some consider a beginner course to help grasp the basics, while others ponder an advanced option education seminar to find out how to use complex trading techniques. If you are considering option education, there are five very strong reasons to jump in with both feet and get educated about option trading.
There was an earnings trade in Adobe (ADBE) that I didn’t take but wanted to analyze after the fact. Dan was able to utilize his OptionsVue software. These I didn’t have, and replay the trade from before the earnings announcement. We were in a position to look at all the options greeks and volatility and consider all the possible options strategies to search for the one that would form the most profitable. While the ADBE trade had passed, I learned how to analyze potential trades. More importantly, I understood why each options strategy produced different results and why a particular strategy was the most profitable. Options are multi-dimensional and a very different animal unlike stocks. A stock may move exactly as you predicted and you would’ve profited. However, you may not have made money on the stock’s options or even have made a loss.
Most people learn the basics before getting engaged in the open stock market. Yet every day, thousands of people jump into trading options without knowing what they are doing. This is curious, because trading on the options market is far more complicated. After all, you not just have to be right about which direction a stock is going to go, you have to see how the timing will affect your profit and loss, how market volatility can affect price and dozens of other little things that may have an impact on your success.
One of the better reasons for trading in the options market is to offset risk and bring in side income from your stock portfolio holdings. It’s a strategy that can backfire if you do not understand the details of implementation. Every stock investor should have a good understanding of the ways buying and selling options can offset and reduce expenses in his portfolio.
There’s no down side to learning more about option trading. You can put everything you learn to use, either immediately or down the road. You honestly have nothing to lose by adopting a course in option trading or joining an option trading class, and everything to win in the path of new strategies, new tools, and new ways to benefit from trading options.
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There are dozens of option education courses and classes available, including online courses and in-person seminars, that can help you improve your outcomes and make more money trading options.
When I started at Lehman, plunked down in the 2001 Associate class, the first thing I realized was that everyone seemed to know each other. Lots of my classmates already knew people at various places in the firm. Partly this was because some of them were interns the summer before, but also, rich kids tend to know other rich kids from the Tri-State area. It’s a small community. People know each other. That’s a fact, and you can’t do anything about …