Many people are interested in Stock Options trading, it can be a great way to earn extra income or even replace a full-time job. You are asking for trouble if you go in and start making trades without having done some study and research before you start trading live.
I say to you get a practice account as a matter of priority. My trading platform of preference to trade options online is called Think or Swim. I have been using it for some time and think it is great. The trading application comes with the basics for trading as well as providing many advanced features to help you better manage your trades.
Once you open your account it is time to start with your first step. That is to discover the simple definitions of Options Trading. Don't skip this step. Here is some options info to help you on your way.
In the world of options tradingyou have Call Options and Put Options. Pretty clear-cut isn't it? Well it is not that simple but don't worry it is not so complicated that you need to be a computer whiz to excel at this form of trading.
To simplify things a call option can be thought of taking a bet that a stock will increase in value within a specified period. It is likely to offer the buyer further leverage than if they were to buy the real underlying stock.
On the other side of the equation a put option is a way to bet that a stock will go down in price within a specified period. It mostly offers the buyer increased leverage over just shorting shares in that stock.
Hopefully now it is becoming clearer about exactly what Stock Options are? Not everyone is going to understand just yet. Keep reading for additional information.
I will now go into more detail about a Call Option (Owner/Buyer)
Here you take part in a contract that gives the buyer the right to call (purchase) 100 shares of an underlying stock listed in the contract, at a stipulated value. This is to occur sometime earlier than the option contract expires, this is in return for paying a premium to the seller of that call.
There are two parts to the contract. There is also the Call (Writer/Seller). The seller of a call option is contracted to sell 100 shares of an underlying stock listed in the contract, once again at a stipulated value at some stage before the option contract is due to expire. The seller receives the premium from the buyer (cost of options).
Don't forget with a Call Option you make money if a share is increasing in value, while the Put becomes more valuable as the stock price falls.
Now for the Put Option (Owner/Buyer)
The purchaser of a put has the right to put (sell) stock to the writer of that put, at a specified price at some stage before the option contact expires.The buyer must pay a premium to the seller of the put for having that right.
Put Options (Writer/Seller)
The seller of the put is waiting to buy a stock at a specified price at some stage before the option contract expires and for that receives a premium from the buyer.
There you go. That is the essential anatomy of Stock Options. If you don't see it clearly now just re-read the material as you really need to get this before moving on to better things such as to trade options online and earn yourself a nice additional income.
Once you master the trading concepts and have started to see some success using your practice account you may want to geta live account. Make sure you have done the ground work before you make the decisionto go live. When you do go with a live account just place small trades and even if you have a good run of success don't go too big too soon.
One key point is to never trade with money you cannot afford to lose. You do not want to put yourself under financial strain while conducting your trades.
