How to start in OPTIONS trading?
- Thread starter jimclark
- Start date
It's an ideal time to enter the option markets. Vols rising and minimal edge loss. 200-wide flies are trading at markets <3.00 wide. 10 years ago the same 4-way would've been 20-wide.
I've not read these, but the best practical-texts seem to be:
Natenberg's Option Pricing and Volatility
Baird's Option Market Making
Cottle's Coulda Woulda Shoulda, or his "Perception" text.
Hull's Options, Futures, and Other Derivatives
I've not read these, but the best practical-texts seem to be:
Natenberg's Option Pricing and Volatility
Baird's Option Market Making
Cottle's Coulda Woulda Shoulda, or his "Perception" text.
Hull's Options, Futures, and Other Derivatives
I do not understand why you need to start but let me offer you some advice. First, make sure you understand everything you read in the Getting Started in Options book (Thomasett author). It is a basic general text but you have to understand everything in there before moving on.
Second, you should understand how options are priced, what the Greeks are, and what is time decay and volatility, as well as understanding the basic strategies.
THERE ARE NO SHORTCUTS. If you do not understand the above, you will make mistakes you need not make and lose money. Options are not just about buy calls if you are bullish and buy puts if you are bearish. Options are to stocks what chess is to checkers.
Some websites with good educational info include:
www.888options.com
www.cme.com
If you want a detailed book on the strateies and basics of options then look to buy McMillian's Options as a Strategic Investment.
That will be a good reference you can rely on as you leanr more strategies and get more familiair with options.
After mastering that level, then the Master's course begins with Natenberg and Cottle to learn volatility and adjustments and undersanding possition dissection.
If you want to know whether you passed the Master's level, find old posts from Riskarb here and ET and see if you can understand anything he says lol.
After you read the recommended reference material, you will still not make money as a retail options trader until you realize the most important aspect of an options price.
The most important factor to an options price is the absolute price level of of the underlying instrument. Even more important to discern is the direction of the absolute price level of the underlying instrument. Implied volatility and time decay are of secondary importance.
In simple language, if you don't have a good system to gauge where the short term price direction of the underlying is headed, it will be extremely difficult for you to consistently make money in options. Therefore, a wise decision may be just to stay the hell away from options altogether, or stick to conservative positions like covered calls.
The most important factor to an options price is the absolute price level of of the underlying instrument. Even more important to discern is the direction of the absolute price level of the underlying instrument. Implied volatility and time decay are of secondary importance.
In simple language, if you don't have a good system to gauge where the short term price direction of the underlying is headed, it will be extremely difficult for you to consistently make money in options. Therefore, a wise decision may be just to stay the hell away from options altogether, or stick to conservative positions like covered calls.
Covered calls are anything but conservative. They are only slightly less risky than naked stock, and as I'm sure others will point out are a synthetic naked put.