Author Topic: Learning to trade options  (Read 886 times)

Dreamer

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Learning to trade options
« on: October 05, 2017, 12:19:29 PM »
I have done some reading about options trading, and would really like to use them in my investment portfolio.  However, I don't feel confident enough in my understanding to actually jump in and trade them.   Can anyone recommend a good book to help me get started?  I do have plenty of experience trading stocks.

mjchamb

  • 5 O'Clock Shadow
  • *
  • Posts: 1
  • Location: Columbus, Ohio
Re: Learning to trade options
« Reply #1 on: November 26, 2017, 06:46:21 AM »
I would recommend the Blue Collar Investor stuff- I learned most of what I know from that, and am currently trading options in my Fidelity IRA with rollover $ from an old employer. Their material is very well laid out, and contains a lot of information beyond what you would find by just googling or buying a waste of money ebook on amazon. It actually goes so far as to lay out an entire system of trading- most things you read out there will only explain how options work without getting into more detail on how to manage trades.

I am very wary of material that may just be a "pitch" for some type of service, but their membership service is simply a weekly email of all the stocks they have screened from the IBD 50 using about 4 technical indicators and some fundamental analysis, which the books teach you how to do in-depth... so you can do it all yourself and forgo paying them a monthly fee.

The one thing to consider is that they only use covered calls and cash-secured puts, but that is the best place to start learning, as all other options are just a combination of puts and calls. Furthermore, if you are trading in an IRA, those are the most complex options you can utilize anyway.

http://www.thebluecollarinvestor.com/store/

Word of warning! The online store is set up poorly and some of the products are redundant- just get the Complete Encyclopedia for Covered Call Writing- Classic Edition which actually contains the material in the "Cashing in on Covered Calls" book and the Exit Strategies book (and make sure you don't accidentally buy volume 2 of the encyclopedia until you have read volume 1). The 0.99 cent ebook on greeks is worth the price if you wish to go more in-depth, but not really necessary unless you like to geek out over the technical aspects like I do. Selling Cash-Secured Puts is the best one to go to after you read the Covered Call Encyclopedia.

Word of Warning #2: don't buy the books from amazon unless you have checked the price- some people are "drop shipping" them for $20-$40 more than if you bought directly from the site- I made the mistake and ended up kicking myself for it.


DM me if you want to talk options more- I'd be glad to share my experiences/have someone to bounce ideas off of.

Cheers!




Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 1030
  • Age: 45
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Re: Learning to trade options
« Reply #2 on: November 26, 2017, 08:35:15 AM »

The one thing to consider is that they only use covered calls and cash-secured puts, but that is the best place to start learning, as all other options are just a combination of puts and calls. Furthermore, if you are trading in an IRA, those are the most complex options you can utilize anyway.


You can make plenty of money (while lowering your risk) with these two strategies.  Most options traders will never need to do anything more complex.  Recommend not venturing into deeper water until at least two years of trading options.  That is a huge part how I was able to retire early with a higher than normal withdrawal rate.
Achieve Financial Escape Velocity - Financial Velociraptor

GoCubsGo

  • Stubble
  • **
  • Posts: 128
  • Location: Chicago Burbs
Re: Learning to trade options
« Reply #3 on: December 01, 2017, 11:58:12 AM »
Thx mjchamb! I just spent an hour watching the Blue Collar Investor video series for beginners.  Seems to have a pretty straight forward teaching style combined with common sense.  I too have an old Fidelity IRA I'd like to start trading option on (looks like I need to call Fidelity in order to enable the options feature on the site). I am going to order the Encyclopedia and see how comfortable I am starting some simple trades from there.

mjchamb: Can I ask how quickly you started making trades and what your level of knowledge was as a starting point?

Financial.Velociaptor- I've read your blog a few time and I love your transparency (don't understand the exact machinations of your trades quite yet, but it's good to read)

TIA

ILikeDividends

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Learning to trade options
« Reply #4 on: December 01, 2017, 02:51:18 PM »
I have done some reading about options trading, and would really like to use them in my investment portfolio.  However, I don't feel confident enough in my understanding to actually jump in and trade them.   Can anyone recommend a good book to help me get started?  I do have plenty of experience trading stocks.
Why not get the skinny straight from the horse's mouth (CBOE)?

http://www.cboe.com/strategies/strategies-main

Strategies broken down by beginner, intermediate, advanced, leaps, etc.

Tons of info available for free.  And it's something to do while you're waiting for Amazon to ship your book, if you go that route, too.  ;)
« Last Edit: December 01, 2017, 04:19:11 PM by ILikeDividends »

ChpBstrd

  • Pencil Stache
  • ****
  • Posts: 625
Re: Learning to trade options
« Reply #5 on: December 03, 2017, 08:53:13 PM »
Even those who understand the technical mechanics are sometimes surprised by the price action. It's still something of a mystery to me.

If your brokerage offers a "paper trading" account, this might be a good sandbox to learn in. Check the pricing action daily to get a feel for what happens if the stock goes up x% or down x%.

PizzaSteve

  • Pencil Stache
  • ****
  • Posts: 666
Re: Learning to trade options
« Reply #6 on: December 06, 2017, 03:08:18 PM »

The one thing to consider is that they only use covered calls and cash-secured puts, but that is the best place to start learning, as all other options are just a combination of puts and calls. Furthermore, if you are trading in an IRA, those are the most complex options you can utilize anyway.


You can make plenty of money (while lowering your risk) with these two strategies.  Most options traders will never need to do anything more complex.  Recommend not venturing into deeper water until at least two years of trading options.  That is a huge part how I was able to retire early with a higher than normal withdrawal rate.
one can also lose money or be forced out of winning positions in good stocks (with tax implications) following these strategies.  fair warning....i lost considerabe upside on a great stock writing covered calls, which were cashed in 6 mo prior to expiration.  i would advise avoiding the temptation. options are rarely misspriced in ways retail investors can exploit.
All posts are opinions of the author subject to independent verification by the reader.  No representations of fact are asserted regarding commercial products or services.

Pizzasteve prefers to avoid excessive critical debates.  In the event of a post, no need to reply or quote if you disagree. I am posting information meant to stand on its own and hope to avoid back and forth debating.

anisotropy

  • Bristles
  • ***
  • Posts: 288
Re: Learning to trade options
« Reply #7 on: December 09, 2017, 12:25:50 PM »

one can also lose money or be forced out of winning positions in good stocks (with tax implications) following these strategies.  fair warning....i lost considerabe upside on a great stock writing covered calls, which were cashed in 6 mo prior to expiration.  i would advise avoiding the temptation. options are rarely misspriced in ways retail investors can exploit.

I agree, the option traders I know that make money all use technicals. Not to mention they rarely interp the same with each other.