how to trade stock options for beginners
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HOW TO TRADE STOCK OPTIONS FOR BEGINNERSBy www.Options-Trading-Education.com
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Options trading can be a profitable way to trade stocks and a way to limit losses as well.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Options trading provides traders with a means of leveraging a small trading account into large gains.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
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http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
But in order gain profits in options trading you need to learn the basics, practice in simulation trading and then start with your own money.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
This article is about how to trade stock options for beginners.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Options Basics
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Stock options are traded with calls and puts. What are call options?
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
In stock trading these are contracts giving the buyer the right to purchase 100 shares of stock per contract.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The trader pays a premium to purchase the options contract.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
He then has the right to buy stock but is under no obligation to do so.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The trader will analyze the fundamentals of a stock and do technical analysis of stock price patterns seeking to predict price movement.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
When he believes that a stock will go up in value he can do a number of things.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
He can just buy the stock. But then, if the price goes down he has lost money, maybe a lot if the fall is precipitous.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
He has also tied up a fair amount of capital in the transaction.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
An alternative is to buy call options.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The buyer of a call contract limits his potential losses to the premium he pays for the call contract.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The seller makes money by selling the contract but assumes the risk of a huge loss if the trade goes against him.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The other basic contract is a put.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
A put contract confers an obligation on the seller (writer) of the put option to buy the underlying equity if the buyer executes the contract.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
As with calls the buyer pays a premium and the seller collects.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The buy is under no obligation to execute the put and will do so only if the stock price falls.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
He limits his potential losses to the cost of the premium he pays.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
The seller gets paid for assuming a potentially large risk of loss.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Practice Makes Perfect
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Options trading is a business. Successful options traders learn to analyze stocks for both short term and longer term price movement.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Then they trade accordingly. The technical analysis of options is applied to short term price movement.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Traders analyze price, trading volume, open interest and price patterns.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Serious traders use a trade station with statistical analysis software and the ability to display a lot of useful information all at once.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Think of working at a trade station like performance art.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
You need to practice and practice until all of the necessary steps are second nature.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Traders commonly use simulation trading programs that have real data from past months and years.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
How to trade stock options for beginners is to start in simulation trading until you are proficient with the tools you need.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Then, and only then, should you start trading with your own money.
http://www.options-trading-education.com/24434/how-to-trade-stock-options-for-beginners/
Another useful step is to sign on with a trading coach for the first few months and follow his or her trades until you are totally comfortable making your own choices.