How do options work?

[newwurldmn]

Thanks for the responses. since at one point, all of y'all were complete beginners and had no knowledge about this stuff like me, if u could go back in time to when u were like me and knew nothing, what would u tell urself? What would you change(it terms of what u did)? What tips would u give urself?

If you find a strategy that looks good, ask yourself why someone would take the other side and assume that individual is smart and informed. If you cannot figure out why then you don't fully understand the risks of your strategy.

 

[lindq]

There's not much free info out there they all assume u know basic options trading knowledge which I do not.

Actually, there's a LOT of free information about options and options trading.

The point has already been made to you - and I will highlight it again here - that you should have a successful background in equities trading before tackling options. Why? Because options, for the most part, are a derivative of the underlying equities. But they are more complex instruments, and thus can get you into serious trouble if you don't have a good foundation of knowledge and EXPERIENCE.

So consider the 10,000 hour rule. 10K experience in equities, and 10K experience in options, and you'll be ready to go.

 

[Equity King]

• Equity options can be bought and sold at any time before expiry.
  
• The price of the options will be determined by the underlying.
• 99% of option traders have no intention of trading the underlying- they will close the trade on or before the expiry date.
• Place small $100 option trades to learn the ropes at first.

Truth is that I have little information on options trading and I find this very useful . Would delve more into trading options with this infor.

 

[OptionGuru]

Truth is that I have little information on options trading and I find this very useful . Would delve more into trading options with this infor.

• Setup an account with TD Ameritrade
• No account minimum for new accounts (IB has a $10,000 minimum for new accounts).
• Plenty of opportunity with $100 trades.
• $100 trades are vastly superior to paper-trading, books, option theory, etc.
• Real trades behave differently than paper-trades.
• The higher commission rates with TD Ameritrade versus IB is not a hindrance to successful option trading.
• JUST DO IT

 

[marsman]

Here's another important tip for newbies: never use market orders, use limit orders instead, and try to get the stuff at midprice between the Bid and Ask.
You have to monitor the price development a while before submitting your own limit order.