What You Must Know to Master Options Trading
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Jason Ng
Apr 20, 2013, 10:30:07 AM4/20/13
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Article Title: What You Must Know to Master Options Trading
Author: Jason Ng
Word Count: 718
Article URL: http://www.isnare.com/?aid=1361161&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=1361161
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Thousands of small retail traders are making a living, and some a fortune, from trading options and you are eager to take a shot at it too, arenīŋŊt you? So, what are some of the things you must know in order to master options trading?
What are stocks and shares and how they work
Stock options are derivatives of shares. This means that you need to know what shares are in the first place in order to understand the role of options and how options work. In fact, you will need to be a master of stock and shares behavior before you could be a master of options trading because options are merely tools that help you exploit these stock and shares behavior profitably.
What options are
Sounds like common sense but most options traders start out thinking options are just īŋŊanother stockīŋŊ which you simply buy low and sell high. Those who jump into their first options trade like this usually get a shock of their lives when they either realize that options donīŋŊt quite move the way they expect them to move and donīŋŊt quite behave the way they expect them to behave. Knowing how options work and what their underlying mechanisms are, the logic behind call and put options are the basic knowledge all master options traders need.
Options strategies
The real magic of options trading lies not in simply buying call options for stocks expected to go up or buying put options for stocks expected to go down. The real magic of options trading lie in the universe of options strategies which allows you to profit not only from an upwards or downwards market but even in a neutral or volatile one. You probably wonīŋŊt be able to learn, practice and master each and every of the hundreds of options strategies but you should have at least one or two options strategies of each class that you are totally familiar with and have paper traded so that you have a weapon for each market condition.
Technical Analysis
Technical analysis is particularly important for options trading as it is through technical analysis that you can make trend analysis in order to know what class of options strategy to apply in the first place. Technical analysis is extremely important in options trading also due to the fact that entry and exit timing is extremely important in options trading where there is a fixed expiration. Technical analysis has been used over the decades as a tool for precision entry and exit and is now an indispensible tool in options trading.
Options Greeks
Options Greeks are the mathematical components that define how a particular option would behave in response to factors such as changes in the price of the underlying stock, changes in volatility, changes in interest rate and time decay. An intimate understanding of all the options Greeks allows you to better understand and predict the behavior of an options position. It also allows you to make intricate adjustments to your options position in order to create a payoff profile that conforms to the exact predicted behavior of the price of the underlying asset.
Delta Neutral Trading
Delta neutral trading is the ability to tweak a positionīŋŊs delta status to a level that is zero or almost zero such that small volatilities in the price of the underlying asset do not affect the value of the overall position. When delta neutral trading is performed correctly, it could even be used as a hedge which profits no matter which direction the price of the underlying asset breaks out into next. This can only be achieved by a combination of call options, put options, the underlying asset and even futures. Different situations require a different approach to delta neutral hedging and that is why it takes a strong knowledge in all of these instruments in order to do delta neutral trading well.
Mastering all of the above will allow you to realize your dream as a master options trader and be able to make a living off trading options. Are you able to master all of the above?
About The Author: Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management and author of http://Optiontradingpedia.com and http://Futurestradingpedia.com. Learn more about Option Trading at http://www.optiontradingpedia.com and learn more about Futures Trading at http://www.futurestradingpedia.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=1361161
*********************** ARTICLE END ***********************
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Message delivered directly to members of the group:
publish-the...@googlegroups.com
*****************************************************************
Please consider this free-reprint article written by:
Jason Ng
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=1361161
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=1361161
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: What You Must Know to Master Options Trading
Author: Jason Ng
Word Count: 718
Article URL: http://www.isnare.com/?aid=1361161&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=1361161
Easy Publish Tool: http://www.isnare.com/html.php?aid=1361161
*********************** ARTICLE START ***********************
Thousands of small retail traders are making a living, and some a fortune, from trading options and you are eager to take a shot at it too, arenīŋŊt you? So, what are some of the things you must know in order to master options trading?
What are stocks and shares and how they work
Stock options are derivatives of shares. This means that you need to know what shares are in the first place in order to understand the role of options and how options work. In fact, you will need to be a master of stock and shares behavior before you could be a master of options trading because options are merely tools that help you exploit these stock and shares behavior profitably.
What options are
Sounds like common sense but most options traders start out thinking options are just īŋŊanother stockīŋŊ which you simply buy low and sell high. Those who jump into their first options trade like this usually get a shock of their lives when they either realize that options donīŋŊt quite move the way they expect them to move and donīŋŊt quite behave the way they expect them to behave. Knowing how options work and what their underlying mechanisms are, the logic behind call and put options are the basic knowledge all master options traders need.
Options strategies
The real magic of options trading lies not in simply buying call options for stocks expected to go up or buying put options for stocks expected to go down. The real magic of options trading lie in the universe of options strategies which allows you to profit not only from an upwards or downwards market but even in a neutral or volatile one. You probably wonīŋŊt be able to learn, practice and master each and every of the hundreds of options strategies but you should have at least one or two options strategies of each class that you are totally familiar with and have paper traded so that you have a weapon for each market condition.
Technical Analysis
Technical analysis is particularly important for options trading as it is through technical analysis that you can make trend analysis in order to know what class of options strategy to apply in the first place. Technical analysis is extremely important in options trading also due to the fact that entry and exit timing is extremely important in options trading where there is a fixed expiration. Technical analysis has been used over the decades as a tool for precision entry and exit and is now an indispensible tool in options trading.
Options Greeks
Options Greeks are the mathematical components that define how a particular option would behave in response to factors such as changes in the price of the underlying stock, changes in volatility, changes in interest rate and time decay. An intimate understanding of all the options Greeks allows you to better understand and predict the behavior of an options position. It also allows you to make intricate adjustments to your options position in order to create a payoff profile that conforms to the exact predicted behavior of the price of the underlying asset.
Delta Neutral Trading
Delta neutral trading is the ability to tweak a positionīŋŊs delta status to a level that is zero or almost zero such that small volatilities in the price of the underlying asset do not affect the value of the overall position. When delta neutral trading is performed correctly, it could even be used as a hedge which profits no matter which direction the price of the underlying asset breaks out into next. This can only be achieved by a combination of call options, put options, the underlying asset and even futures. Different situations require a different approach to delta neutral hedging and that is why it takes a strong knowledge in all of these instruments in order to do delta neutral trading well.
Mastering all of the above will allow you to realize your dream as a master options trader and be able to make a living off trading options. Are you able to master all of the above?
About The Author: Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management and author of http://Optiontradingpedia.com and http://Futurestradingpedia.com. Learn more about Option Trading at http://www.optiontradingpedia.com and learn more about Futures Trading at http://www.futurestradingpedia.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=1361161
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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