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Newbie needs help please
- Thread starter rudygekko
- Start date
For a new person, maybe OptionsXpress should be considered. Ten options cost 12.95 and their web interface is excellent.
You have to buy (or sell) round lots (10) to have any chance of making money. Except maybe IB or TradeStation which charges per option.
They need 100k in capital to write naked calls. Some other firms are less - like 50k at TradeStation.
If you want to do spreads for some reason, you may have to exaqgerate your experience. Personally they seem a little silly to me.
One word of advice, don't hold long options for more than a few days.
You have to buy (or sell) round lots (10) to have any chance of making money. Except maybe IB or TradeStation which charges per option.
They need 100k in capital to write naked calls. Some other firms are less - like 50k at TradeStation.
If you want to do spreads for some reason, you may have to exaqgerate your experience. Personally they seem a little silly to me.
One word of advice, don't hold long options for more than a few days.
You don't need nor want to start with US$50K. That's idiotic.
Depending on your brokerage you can start with US$2k, $3.5K, $5K, etc., the smaller amount the better.
I would look to go with thinkorswim or interactivebrokers. They're both reasonable on commissions, trading oriented, and you won't outgrow them. They both also have good paper-trading platforms, to let you get used to the software, placing orders, etc. However, paper-trading only gets you started. You need to trade with real money, albeit small at first, to get used to the trial by fire.
If you're a beginner don't sell anything naked. Just send me the check instead - it'll be less painful and quicker.
Instead of focusing on the brokerage, focus on education:
http://www.1888options.com/
excellent start and free
http://www.optionplanet.com/
education arm of thinkorswim, but free and no pressure to buy stuff
http://www.cboe.com/
the granddaddy of options exchanges and lots of good info
(you didn't say equity options, but since you're new to options FORGET about options on futures for now)
Option Pricing and Volatility - Natenburg
The book on options
Options as a Strategic Investment - McMillan
Also good book
Depending on your brokerage you can start with US$2k, $3.5K, $5K, etc., the smaller amount the better.
I would look to go with thinkorswim or interactivebrokers. They're both reasonable on commissions, trading oriented, and you won't outgrow them. They both also have good paper-trading platforms, to let you get used to the software, placing orders, etc. However, paper-trading only gets you started. You need to trade with real money, albeit small at first, to get used to the trial by fire.
If you're a beginner don't sell anything naked. Just send me the check instead - it'll be less painful and quicker.
Instead of focusing on the brokerage, focus on education:
http://www.1888options.com/
excellent start and free
http://www.optionplanet.com/
education arm of thinkorswim, but free and no pressure to buy stuff
http://www.cboe.com/
the granddaddy of options exchanges and lots of good info
(you didn't say equity options, but since you're new to options FORGET about options on futures for now)
Option Pricing and Volatility - Natenburg
The book on options
Options as a Strategic Investment - McMillan
Also good book
All right - I'm kinda in the same boat. Been trading stocks for a few years, have read a few books on options and would like to get my toes wet.
Tonight from GS:
GOOG and AMZN options are attractive ahead of earnings
We see good value in Internet options ahead of earnings this quarter and believe an
increase in implied vol from current low levels will more than compensate for time
decay. We recommend buying GOOG April strangles and AMZN May straddles to
profit from an increase in implied volatility ahead of earnings and potential realized
volatility over the next few weeks.
So, like I said, I read a few books (Options made Easy was one of 'em). Strangles and Straddles were mentioned along with all kind of other terms that were beyond me (wtf are Greeks? - deltas, vegas - I thought they were frats and cars).
Anyway, would anyone like to explain to me exactly how to enter a straddle or strangle, or should I just begin in options doing covered calls (or selling puts) as is usually recommended for beginners?
Thanks for any help.
Tonight from GS:
GOOG and AMZN options are attractive ahead of earnings
We see good value in Internet options ahead of earnings this quarter and believe an
increase in implied vol from current low levels will more than compensate for time
decay. We recommend buying GOOG April strangles and AMZN May straddles to
profit from an increase in implied volatility ahead of earnings and potential realized
volatility over the next few weeks.
So, like I said, I read a few books (Options made Easy was one of 'em). Strangles and Straddles were mentioned along with all kind of other terms that were beyond me (wtf are Greeks? - deltas, vegas - I thought they were frats and cars).
Anyway, would anyone like to explain to me exactly how to enter a straddle or strangle, or should I just begin in options doing covered calls (or selling puts) as is usually recommended for beginners?
Thanks for any help.
Quote from topdown:
All right - I'm kinda in the same boat. Been trading stocks for a few years, have read a few books on options and would like to get my toes wet.
Tonight from GS:
GOOG and AMZN options are attractive ahead of earnings
We see good value in Internet options ahead of earnings this quarter and believe an
increase in implied vol from current low levels will more than compensate for time
decay. We recommend buying GOOG April strangles and AMZN May straddles to
profit from an increase in implied volatility ahead of earnings and potential realized
volatility over the next few weeks.
So, like I said, I read a few books (Options made Easy was one of 'em). Strangles and Straddles were mentioned along with all kind of other terms that were beyond me (wtf are Greeks? - deltas, vegas - I thought they were frats and cars).
Anyway, would anyone like to explain to me exactly how to enter a straddle or strangle, or should I just begin in options doing covered calls (or selling puts) as is usually recommended for beginners?
Thanks for any help.
My uncle had a Vega, and my brother was a greek LOL!!!Yeah no kidding. Thanks for the direction fellas, I will commence world domination tommorow on my simulator and keep you guys posted!!!
Quote from topdown:
All right - I'm kinda in the same boat. Been trading stocks for a few years, have read a few books on options and would like to get my toes wet.
Tonight from GS:
GOOG and AMZN options are attractive ahead of earnings
We see good value in Internet options ahead of earnings this quarter and believe an
increase in implied vol from current low levels will more than compensate for time
decay. We recommend buying GOOG April strangles and AMZN May straddles to
profit from an increase in implied volatility ahead of earnings and potential realized
volatility over the next few weeks.
So, like I said, I read a few books (Options made Easy was one of 'em). Strangles and Straddles were mentioned along with all kind of other terms that were beyond me (wtf are Greeks? - deltas, vegas - I thought they were frats and cars).
Anyway, would anyone like to explain to me exactly how to enter a straddle or strangle, or should I just begin in options doing covered calls (or selling puts) as is usually recommended for beginners?
Thanks for any help.
topdown...I'll give this a shot...yes you should avoid straddles and strangles until you understand volatility. Take time to read and understand McMillian "Options as a strategic Investment" and Natenbergs "Option Pricing and Volatility" Since you have experience in equities start trading vertical put and call spreads on equities you have a "feel" for. Once you have success.... in low volatility environments trade some calendars on these stocks. When the volatility gets very high then sell some straddles. Until you really understand what is going on trade very small lots, even though you burn commission $$ its worth it. The market is the best teacher so put on some real trades and keep it small and build on success.
Never trade what you don't understand, know or have a feel for.
Quote from rudygekko:
Hi, I am new to options and would like anybody's advice on a good options trading firm, trading restrictions for a new options trading account, and capital investment requiements for options trading accounts. Links to old threads would also be highly appreciated. Thanks again!!
As it has been mentioned by other people, Thinkorswim is a great broker not only for a beginner, but also for an experienced trader. They have great support, one of the best platform, if not the best, and reasonable commissions.
I wouldn't recommend going with Interactive Brokers as their support sux so you are pretty much on your own with them, which is not a good thing for a beginner who may require some assistance.
Also, Thinkorswim has no trading restrictions so once you are approved for options trading you can trade any strategy you want, provided you can fullfil the margin requirements.
Finally, there's no point providing links as the whole forum is about options, just take your time and read thru, there are tons of good stuff here.
Quote from RichardRimes:
topdown...I'll give this a shot...yes you should avoid straddles and strangles until you understand volatility. Take time to read and understand McMillian "Options as a strategic Investment" and Natenbergs "Option Pricing and Volatility" Since you have experience in equities start trading vertical put and call spreads on equities you have a "feel" for. Once you have success.... in low volatility environments trade some calendars on these stocks. When the volatility gets very high then sell some straddles. Until you really understand what is going on trade very small lots, even though you burn commission $$ its worth it. The market is the best teacher so put on some real trades and keep it small and build on success.
Never trade what you don't understand, know or have a feel for.
I really appreciate the advice RR and I ordered the McMillan book last night. I can tell that I need to dedicate some quality time studying this stuff in order to get a decent grasp. It's difficult to find the time as I seem to spend 15 hours a day researching stocks, reviewing charts, etc. This will definitely be a topic I will dig into during any vacation time I can grab this summer. In the meantime, is there any "simple" option plays you would recommend to hedge my equity positions, or to gain additional profit from them? I usually hedge my total portfolio by holding a short index ETF. I'm thinking options may be a way to accomplish the same thing without requiring as much capital. Again, thank you for any and all insight.
Good brokers for beginners:
www.optionshouse.com
www.optionsxpress.com
www.thinkorswim.com
There have been a lot of good educational sites listed already, but I would make a few additions.
First, the OIC website is
www.888options.com
Second, I would skip out on Options Planet since I believe they charge for their education. Since you are new, I would definitely stick to the free sites, since they offer much more bang for your proverbial buck.
The CBOE's site has already been listed, but I would definitely add the options insider.com to the list.
www.theoptionsinsider.com
They seem to be the leader among the free options sites these days. I'm a pro and I check out their site all the time, so they should be more than adequate for a beginner like yourself.
Lastly, don't worry about needing 50K to trade options. As others have suggested, that is waaaay too much for a novice options trader. Start out with a few thousand and buy or write a few calls to get a feel for it. Once you get a feel for it, and you've read up on the options education sites, then you should be ready to roll. Hope that helps.
www.optionshouse.com
www.optionsxpress.com
www.thinkorswim.com
There have been a lot of good educational sites listed already, but I would make a few additions.
First, the OIC website is
www.888options.com
Second, I would skip out on Options Planet since I believe they charge for their education. Since you are new, I would definitely stick to the free sites, since they offer much more bang for your proverbial buck.
The CBOE's site has already been listed, but I would definitely add the options insider.com to the list.
www.theoptionsinsider.com
They seem to be the leader among the free options sites these days. I'm a pro and I check out their site all the time, so they should be more than adequate for a beginner like yourself.
Lastly, don't worry about needing 50K to trade options. As others have suggested, that is waaaay too much for a novice options trader. Start out with a few thousand and buy or write a few calls to get a feel for it. Once you get a feel for it, and you've read up on the options education sites, then you should be ready to roll. Hope that helps.