Options newbie needs some help...

T

Tybeas

Hi all,

As you can guess, I'm new here,

I've been interested in the financial markets for quite a few years so far, and I currently nourish the dream of being a trader for living. I've been mostly interested in options for the leverage they procure. Being a good "padawan", I read almost everything I can find on options and trading. So I can honestly say that I have a good understanding of options concepts, strategies and terminology.

I can also make nice Excel spread sheets with my potential profit/loss including commissions fees :D so I know my risk with these trades. I guess you can say I'm getting good (let's say at least not too bad) with the theorical side of trading options.

But still, the technical knowledge is missing. I recently opened an account with the discount broker of my financial institution (I never tought discount could mean minimum fees of 30$ per trade lol). I also got into a long call position that went the wrong side one hour after I bought it (it's okay, everyone fell off their first bike ride right ?) and tried to "save the ship" by turning this into a covered call only to be told, after being transfered 6 times at my broker's customer service (I soooo want a job there now lol) that I need a different type of account to make this kind of transaction....

:( :confused:

So as you can guess, I hope someone here can answer my questions, or at least point me to somewhere I can find my answers.

So :

1- What type of account does it take to make options strategies other than buy and hope (erm hold :D ) ? (Wrting options, covered or not, debit and credit spreads ?).

2- Is there any gauge for the minimum amount needed to be in the account ? (like 50% of the trade or 2k, or things like that). Surfing a little bit on different brokers I saw somewhere you need 100 K to be able to write naked options..... ??

3- Also do you have any real "discount" broker for trading option to recommand me ? (I trade in Canada but also interested in the US)

4- Do you know if they make credit verification for some options account ? Do they check income and things like that or it's just to be sure you're not a crook (Cause I'm a student and don't have any income right now and also got a negative net value due to the lovely financing of my studies)



Well that pretty much sumarize it up, thanks a lot in advance for your answers !
 
Quote from Tybeas:


1- What type of account does it take to make options strategies other than buy and hope (erm hold :D ) ? (Wrting options, covered or not, debit and credit spreads ?).

2- Is there any gauge for the minimum amount needed to be in the account ? (like 50% of the trade or 2k, or things like that). Surfing a little bit on different brokers I saw somewhere you need 100 K to be able to write naked options..... ??

3- Also do you have any real "discount" broker for trading option to recommand me ? (I trade in Canada but also interested in the US)

4- Do you know if they make credit verification for some options account ? Do they check income and things like that or it's just to be sure you're not a crook (Cause I'm a student and don't have any income right now and also got a negative net value due to the lovely financing of my studies)
More...

1. You need a margin account with maximum options approval

2. The broker will liklely have minimum dollar amounts needed for each level. E.g. naked writing = $100K

3. I think IB is in Canada? There are many in the US...

4. They do not do a credit check or anything. They just go off the information you give them. They just have to make sure the investments you have access to trade suit your risk tolerances and life style.

:)
 
Quote from Tybeas:

Hi all,

As you can guess, I'm new here,

I've been interested in the financial markets for quite a few years so far, and I currently nourish the dream of being a trader for living. I've been mostly interested in options for the leverage they procure. Being a good "padawan", I read almost everything I can find on options and trading. So I can honestly say that I have a good understanding of options concepts, strategies and terminology.

I can also make nice Excel spread sheets with my potential profit/loss including commissions fees :D so I know my risk with these trades. I guess you can say I'm getting good (let's say at least not too bad) with the theorical side of trading options.

But still, the technical knowledge is missing. I recently opened an account with the discount broker of my financial institution (I never tought discount could mean minimum fees of 30$ per trade lol). I also got into a long call position that went the wrong side one hour after I bought it (it's okay, everyone fell off their first bike ride right ?) and tried to "save the ship" by turning this into a covered call only to be told, after being transfered 6 times at my broker's customer service (I soooo want a job there now lol) that I need a different type of account to make this kind of transaction....

:( :confused:

So as you can guess, I hope someone here can answer my questions, or at least point me to somewhere I can find my answers.

So :

1- What type of account does it take to make options strategies other than buy and hope (erm hold :D ) ? (Wrting options, covered or not, debit and credit spreads ?).

2- Is there any gauge for the minimum amount needed to be in the account ? (like 50% of the trade or 2k, or things like that). Surfing a little bit on different brokers I saw somewhere you need 100 K to be able to write naked options..... ??

3- Also do you have any real "discount" broker for trading option to recommand me ? (I trade in Canada but also interested in the US)

4- Do you know if they make credit verification for some options account ? Do they check income and things like that or it's just to be sure you're not a crook (Cause I'm a student and don't have any income right now and also got a negative net value due to the lovely financing of my studies)



Well that pretty much sumarize it up, thanks a lot in advance for your answers !
More...

1. You'll likely need a margin account. Some brokers will let you do defined risk option positions in an IRA/cash account.

2. For a debit spread they'll charge you the debit up front. A credit spread typically will reduce your buying power (essentially the broker holds the cash to cover the position if it goes against you the maximum amount). At your stage DON'T EVEN THINK ABOUT NAKED WRITING.

3. Interactivebrokers is good. Check Optionsexpress and thinkorswim as well for Canadian opportunities.

4. The information you fill out is just so they can cover their butt if you blow out your account and try to sue them or pull them into arbitration.

Also, if you're trying to convert a long call into a covered call you may want to read up some more. I think you meant converting it to a bull call spread, but I'm not sure. Either way, I'm not trying to 'call' you out - just trying to save you some money.

Good luck with it.
 
LOL! I would start with Hull's book.

If you meant that you were going "save" your losing position in your long call by selling the underlying, that is call being long a synthetic put. Why not just sell the call and take your loss instead of switching your position and starting out underwater?

Seriously, get a good book. You can start by looking around Thinkorswim.com, but you should have a firm grasp on the greeks and different spread strategies before you consider trading options.

If I were your licensed securities rep, and you told me you wanted to turn your losing call position into a covered call, I would terminate your account for fear of being fired.
 
Humm, yes actually sorry about using the wrong terminology

I was refering to a bull call spread yes and not a covered call. I get confused sometime since I learn in both french and english and it can get confusing. I might be stupid to bet on a loosing horse but not so to put even more money in it lol.... wellll... nah kidding, kidding.

Thanks for the tips and quick reply !
 
Quote from Tybeas:


I've been mostly interested in options for the leverage they procure. Being a good "padawan", I read almost everything I can find on options and trading. So I can honestly say that I have a good understanding of options concepts, strategies and terminology.
More...

You got it all backwards: options are primarily used to control risk, not to increase it by way of leverage.
 
Just a quick note.......u have to decide whether u want to be a directional trader, and how much so.

If any directional calls will be made, another area u have to study very carefully is technical analysis first. Otherwise the options part will be dangerous. (wrong order of learning).

As u said after u bought calls, the market goes the other way.
 
You must log in or register to reply here.
Back
Top