If you're struggling with making money from the stock market, forex, or any other market, then you might want to consider options. It's not easy to become a consistently successful options trader. Options are complex financial instruments whose price depends on numerous factors that must be monitored. There are ways to avoid a long learning curve and start trading online, at home, or elsewhere. Like in any other subject, learning options trading requires time and effort. 

Options vs Stock Trading

As I've written before in other posts, most trading markets (such as stocks, forex, options, etc.) offer a 50% /50% winning chance. You enter a long position when you expect the asset to move upward, and you enter a short position if you expect it to move downward.
It's hard and it's not easy to find a profit­able system, at least from what I've experienced with them. And I'm also a bad market fore­caster. that's why I started trading options. Learning options trading was a bit challenging at first because they're different kinds of assets.

Options are so versatile that they can be used with simple trading strategies or far more complicated ones. It depends on how much time you want to spend learning. For beginners, it's best to stick with basic Put or Call verticals for directional trading. As you advance to more advanced strategies, where you're able to trade non-directional trading strategies like Butterfly Spreads, Iron Condor Spreads, Calendar Spreads, or even understand other complex trading strategies like the Ride Trade Strategy, I am teaching and trading. You may find my options trading courses which you may learn. These are in fact my own options strategies that I trade live.

Options are far more flexible in terms of risk management and present several possibilities or strategies that can fit any asset movement forecast (move up, move down or stay in a range). One of the simplest ways for beginners to start trading options is through Vertical Spreads options strategies. They are used to implement a directional trade. Vertical Spreads can be used with Puts or Calls and have a similar profile of buying or selling a stock, with a fraction of the risk and a fraction of the investment.

Most stock traders, don’t trade options, although these are the most flexible trading instruments that exist with endless possibilities to control risk. But, my advice is that they should move their trading to the next level and become stock options traders. Learning options trading will be the next step toward achieving consistency. I guess most of them do not use options because of their learning curve, due to its complexity at first sight. It can be intimidating if you do not start with the right tools. In fact, there is a lot of free information on the internet that can help you to start to learn options trading and its basics. The most common options spreads like Verticals, Iron condors, Calendars, to name a few are explained everywhere if you google them. But, when anyone starts to trade options must realize they are in a multidimensional environment. Beginners have some difficulties adapting to control those several dimensions for an option position. In stock trading, there is only a plane that moves: price! Easy to follow and understand.

The options market has additional complexities due to its multidimensional playing field. As said above, unlike stocks or forex which only have the price as the sole dimension. Learning options trading can be time-consuming due to some specific jargon that starts with the basic options strategies (that are the building blocks of more complex strategies), but also the variables that can be used to monitor option positions as well as options portfolios called the Greeks. That is why I am suggesting you take some options trading courses where you will learn an options strategy with clear guidelines on what to do if the market goes against you (or in your favor). It will speed up your options trading learning process. 

Options risk management

Delta, Theta, Gamma, Vega… are the main options Greeks that every options trader must understand and manage. You can learn more about them here in a blog post. Beginners options traders need to change their mindset into these 4 variables and forget the current price movements of the underlying they are trading. For basic options trading approach, it can be focused on one of the Greeks, mainly Delta, if it is the case of a Vertical Spread. Delta is the Greek that explains the directional risk of the trade and is influenced by the stock price. More complex trades like Calendar Spreads, Delta, Theta, Gamma, and Vega (all four Greeks) which involve several option contracts are key to managing properly the position and its risk. Which are also key to understanding an entire portfolio risk that can be summed up on those four variables. This is also taught in options courses or coaching sessions I am delivering.


Understanding how options can be used

But the rewards, flexibility, and diversification opportunities turn to learn options trading worth it, despite its complexity. Like in any new issue that you want to learn you need to be motivated and eager to. I think the potential outcome this can bring is a good motivation... check here my results of my trades that our community follows through memberships.

For me, one of the big advantages of using an options contract to trade is its leverage. By a fraction of the price paid of 100 shares, for example, you can buy a Call or Put contracts for a certain period of time and have similar exposure! Or even if you combine selling options with buying options, you can reduce the investment needed. Hence, you can have a lower initial investment than buying stock and an attractive maximum profit target at expiration. Again, this is an example of the Vertical Spread. The easiest to apply. The basic options trading strategy from my perspective (excluding trading single Puts or Calls). Any Options contract depends on the stock price.

Here you have some ways we could use to trade options:

1.     Portfolio hedging. The most basic form of using options is to buy a put to hedge a long stock position. A similar way and “cheaper” is to buy Put Verticals. This will protect a trader's long stock/ETF position against the large down move, reducing losses that would occur without those. This is very similar to insurance and, hence, it will cost money and reduce overall portfolio performance, but also reduce its volatility.

2.     “Income” trades. There are several income strategies, but the easiest is to sell a Put. The Put seller may be bullish on the underlying asset but wants to acquire it at a lower price or simply gain exposure in a less directional way. Selling puts has positive expected returns over the long-term with less downside exposure than owning the underlying asset outright. Of course, the trade-off is that your upside is also limited. There are other "income" trades like Calendar spread options, Iron Condors or Butterflies.

3.     Directional. Options can also deliver directional strategies like it was stated before. Similar to go short an asset, a trader can buy a Put our buy a Put Vertical if he anticipates the assets will move down. If he wants to have a similar position like going long in an asset, he can buy Calls or Call Verticals. In a simplistic way, this is how it works.

These 3 simple examples outline some ways to use options. There are many other ways to use them with several strategies, like the ones I trade (ex, the Pro Iron Condor or the SPX Best Trade where you can access its options trading courses. The easier spreads are the ones talked about earlier and are called Vertical Spreads, where one option is bought and another is sold for a bet in one direction of the underlying. Not the case of the above options strategies, where you do not need to guess the market direction.

An additional factor to consider is the timeframe (period of time) to where you will position your option strategy. Another complexity was added... Since options have several options chains that expire at a certain future date, this is another variable to consider by the options trader. Are you a fast profit seeker, meaning you consider yourself a speed trader? Then you should look into strategies in a short time frame, like the SPY Speed strategy that uses weeklies in a 15-day until expiration options. Or you are a more conservative trader that seeks low volatility in the trade results, and more consistency, then look into longer-term options strategies like the Ride Trade.

 
Where should you start?

You need to decide whether you want to learn on your own or get help from someone who can guide you and shorten the time needed for you to learn. A Beginner Options Trader is someone who knows at least the trading profile for a put and a call option (or the potential profit profile at expiration). This is where to begin. You can look up the basics online. However, taking some options courses, joining a Trading Community or coaching sessions to clarify your doubts will help you speed up the learning curve, and will avoid some beginner’s mistakes.

I have another blog post with some resources here. 

If you want to clarify doubts and understand the mechanics of options trading, as well as, some tips I learned from my past experience (that you never find in any book), I am doing mentorship and classes for anyone who wants to trade options (from beginners to advanced traders) or take any of those strategy options courses. From my perspective this is the best way to learn to trade options fast and reduce any losses you may encounter in your options trading, avoiding beginner trading mistakes. You can move from a beginner options trader to a knowledgeable options advanced trader, where you clearly understand the concepts and trade complex options strategies like I do.

If you understand the mechanics of these ones you can move into more complex spreads or options strategies like the Speed Trade. In essence, this trade is to be in place for about 3-5 days. It uses SPY (index ETNs) to avoid big price movements. It uses only one adjustment type to simplify.

This is a question that I get asked quite often, and it’s something that I think about myself every day when I trade. The answer is simple: you have to start somewhere. You can’t just jump into the deep end of the pool without knowing how to swim first. I’ve been trading for over 10 years now, and I still remember

How can I practice options trading?

After some time studying how options work, I advise you to open a demo account first: Thinkorswim from TD Ameritrade offers the possibility to use "paper money". There you can buy or sell options contracts and check your positions, options greeks, etc without risking your own money... then when you feel comfortable, you may move to a live account. Check their link here.

You can also test one simple options strategy that I am disclosing for FREE. You can access it here. Enjoy!