Thinking About Option Trading Quiz

Depending on their investor profile investors can be divided into different groups. Some may be short-term investors who deal intra-day trading and others prefer to purchase and hold and they’re considered long-term investors. Some may like to diversify their asset over many instruments and others prefer to invest in one. Some are risk tolerant and some buy only in mid-cap. So, before you want to learn to trade options first find out about your profile because one strategy does not fit all the different personalities. There are many factors that develop the profile. Your investment goals, objectives, will then be inline with the answers you provide through the profile quiz.

Investment Objective-Your broker won’t approve your application unless you select ‘most aggressive’ investment objective. This is because credit spreads are considered high risk financial instruments.

Investment Experience-You must report at least 5 years of stock trading, credit spread experience, and option trading. I realize that it’s a catch 22 if you’re applying for credit spreads for the first time. You need credit spread experience to get approved. However, your broker doesn’t want any liability in you trading financial instruments that you don’t understand.

A Few Other Things

Quiz-Some brokers like Optionsxpress have a quiz that you must pass, with a view to get approved for credit spreads. Make sure you understand the difference between net debit and net credit and can demonstrate the maximum loss or maximum gain for any given trade. Fidelity doesn’t have a quiz as of the preparation of the present article.

Minimum Equity Requirement-You are required to have $10, 000 minimum equity in your account to trade credit spreads. This may not change the application process. However, it will affect your capacity to make trades if you’re approved. You will also need to provide the maximal loss of the trade upfront every time you trade, so that your broker doesn’t risk losing money.

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Now if you wish to learn to trade options you must know your investment personality type so can potentially maximise your gain and cut off chances of loss by using strategies that are best placed to your personality type. Options are a type of security like stocks, mutual funds or bonds. They are often regarded as having better risk management options than other types of trading. So if you’re an investor who prefers to have managed risk, then you should learn to trade options. As any wise investor you need to dispose of the right education before you start trading options. Go through some quality tutorials that will teach you options in a simple language and not overloaded with technical terms.

When you choose an online training program to learn to trade options you should also look around for the services they offer. Some good training modules that will start you with options education, from the basics, online sessions on market intelligence run by actual experts, so that you will be able to address and clarify and doubts or concerns you may have, options trade recommendations, options trading strategies and much more. Going through your investor profile you’ll understand what option strategies are best suited to your risk profile.

You must understand that trading options involves risk however this can be managed through the right strategies just like stocks or mutual funds. Your investor profile will give you a greater understanding of the risks and to draw to trade options with this support you’ll experience a stronger start. Options Trade Recommendations service can send notifications straight to your mobile phone. So all you would need to do is call your agent or put it on the trading platform. So, take your time and go through the training, as it is a vital stage in your success of options trading.