Getting Started With Options Trading

Here’s another article from Seeking Alpha that does a great job directing you in getting started with option trading. Then later in the article three possible option trades are suggested. Rocco Pendola (the author) also does a great job of explaining his reasoning behind suggesting the trades.

As I discuss quite frequently on Seeking Alpha and in my options investing newsletter, investors often give options a bad name. There’s no question that lots of people get burnt using options, but don’t blame the call or the put. Instead, take a look in the mirror and, while you’re at, implicate the typical and traditional sources of options information and education.

In my experience, you’re no more likely to get hurt with options than you are stocks, provided you use them properly. But what does “properly” mean?

First, before you even make a simulated trade, learn the basics. And the basics are not the Greeks or something that resembles pre-calculus. Don’t be fooled by cats who, on an ego trip, like to show you what they know by making options more complicated than they need to be.

Once you get some basic tenets under your belt, start to sim trade. At the same time, dig into some higher-level concepts such as Delta, Theta and implied volatility. Learn about intrinsic and extrinsic value. From there, with a good handle on the basics and a developing comprehension of more intermediate-level stuff, work a couple basic strategies into your portfolio.

Start with a simple, non-threatening covered call. Take a stock you own a considerable amount of. Name a price you would not mind selling a few hundred shares at and sell an OTM call against the position. Sit back, watch and learn as the situation unfolds. Being short a covered call can…

Go to Seeking Alpha for the rest of the article

Option Trading Secrets