Learning to Trade Options
Option trading has many advantages over other investment vehicles. Trading in option contracts can give an investor the flexibility to place bets on very specific market outcomes.
For example, an option trader can make a bet that in 6 months time a stock will be trading either above a certain price or below a lower price – an each way bet if you will. If the stock trades between these two prices in 6 months, the trader will lose a predetermined amount. This type of option strategy is known as a Long Straddle or could also be a Long Strangle.
Options was written to introduce new comers to option trading terminology. As you go through the basics you will be exposed to key terms that will become clearer as you progress through this short course in option trading.
After you have become more familiar with the basics of option trading, why not take a look at some of the possibilities of Option Strategies. This section describes the main strategies used by investment professionals.
I have also developed an option pricing spreadsheet that you can download for free. It prices European options using the Black Scholes Model and can also calculate all of the option greeks. You can also use it to test risk/reward profiles for various option strategies to help you better understand option trading.
Option Trading Tutorials
The tutorials section will go through actual examples of how to use options to make directional bets in stocks and futures. Even though the trades are hypothetical they are illustrated on a real time basis and updated frequently.