Selecting an Options Trading Advisor
Selecting an options trading advisor is an important step in preparing to trade options. Before we break down the different types of accounts, let’s talk with the beginners first. If you have experience investing in the stock market, you probably already know that you can trade options with you current account.

Selecting an Options Trading Advisor
For the beginner, this is a very important step. In fact, selecting an options trading advisor and creating a stock trading plan are the two most important things you can do prior to entering the market. The critical factors in selecting an options trading advisor are:

• Know Yourself – Be honest in evaluating your tendencies; are you a risk taker? Do you like to study and do research? Do you enjoy the idea of investment risk? Do you realize that you have more dollars than sense? You know the answers to questions like these; it is important that you understand your tendencies because there are options trading advisors for every personality type.
• Knowing The Available Advisors – Sounds difficult but once you have done a self-evaluation, you are well on your way to finding the right options trading advisor for you. Investment firms offer a number of different accounts types based on the needs you have.
• What Are The Different Types of Accounts?
• Trading accounts vary based of level of service, cost and available resources. The list below will give you an idea of the different types of accounts available:
• Discount Trade – This type of account is intended for the experienced trader; you will not have the security of an options trading advisor. Because you will be calling your directly to the order desk or the floor, you will receive nearly instantaneous placing of orders. The commissions for discount trades are low but little is available as far as research or recommendations from an options trading advisor.
• Internet Trade – Is it important to you to talk with an options trading advisor? If not, Internet trade may be the way for you to go. You can place trades, cancel replace orders, view your account status and get real time quotes, all with the click of your mouse. Since you are handling your own account, commissions are low, ranging from $10 to $40 per transaction. Like discount trades, this isn’t recommended as the best alternative for beginners because there is little support beyond implementing positions.
• Broker Assisted Accounts – If you have some experience in the stock market but still need the guidance of an options trading advisor, this is an excellent option. In addition a beginner who is extremely disciplined and dedicated to learning might be interested in this level of support. Options trading advisors are available to help you with information, advice, placing orders and charting. Prices are in the $50 range per transaction which falls directly between discount trades and full service brokers.
• Full Service Recommendations – With this type of options trading advisor you will likely be on a first-name basis, since he or she will probably be assigned to your account. Such advisors will be able to help you form an investment philosophy as well as placing trades, offering investment advice and reviewing your individual trades. This is the most expensive option but the best for the beginner or the investor that doesn’t want to spend the time to research and chart potential positions. Commissions for a service such as this range upwards of $100.
• Day Traders – Do you want to participate in the lightening quick trading of day trading? If you want to regularly trade in and out of positions on the same day? If you are committed to turning your positions every day, this is a good account for you. Commissions are reasonable and range from $10 to $25.

Conclusion
Along with the trading rules in your stock trading plan, selecting an options trading advisor and trading account will likely be your most important decisions in the stock market. Analyze your personal approach and tendencies and select your options trading advisor based on your needs.

Be sure to learn more about options as well as how to develop your options trading plan.

A Discussion of Options Exchanges
An important part of formulating a stock trading plan is provisions for options trading as well. In the options exchange, options orders are agreements between two investors where one party agrees to deliver something in the stock market to another party within a specific time period and for a specific price. Ownership, as normally defined, does not exist because you don’t need to possess a particular stock in order to implement a position.

In the options exchange, a stock order, whether it is a “call” (an agreement to purchase) or a “put” (an agreement to sell), gives the holder the right to purchase the designated options; in addition, the holder is entitled to simply let the options order expire without investing further.

Options Exchanges
When formulating a trading plan for options, your investment philosophy will be unaffected by the options exchange and their locations. With the use of the Internet and options trading advisors, location is not much of an issue. Some of the better known options exchanges are:

• Philadelphia Stock Exchange (Philadelphia, PA)
• Chicago Stock Exchange (Chicago, IL)
• American Stock Exchange (New York, NY)
• Chicago Board Options Exchange (Chicago, IL)
• Pacific Stock Exchange (San Francisco, CA)
• Cincinnati Stock Exchange (Chicago, IL)
• International Securities Exchange (New York, NY)
• New York Board of Trade (New York, NY)
• New York Stock Exchange (New York, NY)
• NASDAQ Stock Market (New York, NY)
• Boston Stock Exchange (Boston, MA)
• Kansas City Board of Trade (Kansas City, MO)
• Philadelphia Board of Trade (Philadelphia, PA)

Types of Options Orders
Options orders cover in a number of different scenarios, offering the investor the ability to buy or sell and setting conditions for the transactions. The following are some of the options orders that are available:

• Buying Calls – Buying a Call in the options exchange is a bullish options order on an underlying stock value. The investor has the opportunity to speculate on the rise of the stock’s value for the term of the contract with a predetermined risk. Most investors will look to sell their contract at a profit, while others may intend to exercise their right and purchase the underlying shares.
• Buying Puts – Buying Puts in the options exchange is a bearish, somewhat speculative options order in which the investor anticipates that a stock will decrease in price during a set period of time. The trader realizes a profit when the stock and its underlying put option decrease in price during a set amount of time.
• Selling Puts – When you sell puts in the options exchange, you are selling someone the right to sell you the underlying asset at a fixed price, on or before the expiration date of the option order. You can use this options order when you are bullish on the market and feel that it isn’t likely to go down in the short term, you can sell puts on a quality asset that you would like to own at a discount.
• Selling Covered Calls – Selling a covered call is an order in the options exchange where investors are willing to pay for the right to take a stock if it reaches a much higher price. It is an excellent strategy to implement while waiting for a stock to reach your identified sell point.
• Buying Strangle – A strangle buy in the options exchange is implemented by purchasing a call option and a put option on the same asset with the same strike price and expiration date.
• Buying Straddle – A buy straddle is implemented by purchasing a call option and a put option on the same asset with the same strike price and expiration date. In the options exchange this is a desirable move because the risk is limited to losing the premium paid but its reward is unlimited.

Improving Your Odds In The Options Exchange
Is there anything else you can do to increase your chances of success in the options exchange? Yes there is; using a trading system like Japanese Candlesticks adds a powerful charting system, especially in the options exchange. Candlesticks was invented over 300 years ago as a method for trading in the rice markets of ancient Japan. The success of the system has grown and developed and it is an amazing tool for today’s options exchange. With the charting abilities you will gain from Japanese Candlesticks you could literally have a view inside the directions of options before they even move. Added to your trading plan, Candlesticks can put you in the right company for successful trading in the options exchange.

Options Analysis – Trading the Hype For Success
If you have ever browsed the Internet looking for stock tips, the offers jump off of the page literally screaming at you. “Start trading for BIG PROFITS by turning less money in MORE MONEY!” or “93% Winners, $18k Profit” or my favorite “Find out how to make over 87% gain monthly. Up 954% since Jan 2006!”

In spite of any promises that might be made to you, investing in the stock market has not been turned into some easy-to-learn program with astounding results, especially in the options markets. Substantial profits can be made but not because of some miracle program; if such a program existed, we would all spend the $49.95 to buy it and be incredible rich. In reality, profits are usually the result of strong options analysis, successful stock trading plans and technical analysis

In theory, options analysis and options trading are easy; all you need to do is find stocks that are going up and buy calls on them. Then you find stocks that are dropping and sell puts on them. That’s pretty easy, right? Well if it’s easy the reason is that you have spent the time researching, not because of some program off the Internet. Technical analysis and charting give you the silver bullet to increase your success in the stock market and a trading system like Japanese Candlesticks is the most powerful system available for options analysis.

What is Japanese Candlesticks?
Japanese Candlestick signals were invented around 1700 as a method of analysis in the country’s rice markets. The Japanese Rice traders analyzed reoccurring signals on trading charts when trying to pinpoint the exact times to get in and get out of their positions. Analysis with these signals made the Honshu family immensely wealthy. The signals they identified are as effective today in options analysis as they were centuries ago because while they were developed for futures analysis, they are equally powerful in options analysis.

Options analysis with Candlesticks
Candlestick charting is superior to standard bar charting. Bar charts are limited to showing you a price range for a given time period; it does not show you patterns which can help with identifying trading patterns. Japanese Candlesticks provides the type of insight needed for successful options analysis. Candlestick patterns are extremely powerful for options analysis because it provides the user with the three criteria of options trading: direction, time and magnitude.

• Direction – Most investors have difficulty in identifying the direction of a price move. Utilizing Candlestick analysis greatly increases the probabilities of at least having a price move analyzed in the proper direction. Knowing the direction of a trend with a relatively high degree of probability allows the trader to produce high profit option strategies.
• Time – The amount of time available for a movement in price is also an important factor. The strategy for a trade will be vastly different when considering a trade that will expire in one week versus a trade that will expire in two months.
• Magnitude – Magnitude, the third key element, indicates stock volatility. Volatility is both the friend and the foe of investors. The Candlestick signals provide the ideal search technique for finding the trades that will move in the magnitude required to make successful trades. Utilizing gaps located by the Candlestick charts provides a source of high profit potential trades. Gaps, or windows, appear during options analysis and indicate to investors when they should get in or out of a position with vigor.

Conclusion
Since an investor is able to analyze direction, time and magnitude with Japanese Candlestick charts he or she is better equipped for options analysis and for knowing when to enter or exit positions. Options analysis with Japanese Candlesticks is not a magic wand for conjuring successful trades but a valuable tool for identifying conditions in the market and finding the profitable times to enter and exit trades.

An Overview of Options Orders
Options orders are defined simply as an agreement between two investors where one party agrees to deliver something in the stock market to another party within a specific time period and for a specific price. For options orders the standard concept of ownership does not exist because you don’t need to own a particular stock in order to implement a position. Have you purchased a position and now you are interested in short selling that option? In the stock market you would have to borrow the stock to do it; in options trading you only need to understand that there is no ownership and no problem making the transaction.

An options order or stock order, whether it is a “call” (an agreement to purchase) or a “put” (an agreement to sell), gives the holder the right to trade options; in addition, the holder is entitled to simply let the options order expire without investing further. Options orders can be low-risk ways to make money in the stock market because many times you can exit an option order that is unfavorable for only the price of the premium.

Types of Options Orders
Options orders cover in a number of different scenarios, offering the investor the ability to buy or sell and setting conditions for the transactions. The following are some of the options orders that are available:

• Buying Calls – Buying a Call is a bullish options order on an underlying stock value. The investor has the opportunity to speculate on the rise of the stock’s value for the term of the contract with a predetermined risk. Most investors will look to sell their contract at a profit, while others may intend to exercise their right and purchase the underlying shares.
• Buying Puts – Buying Puts is a bearish, somewhat speculative options order in which the investor anticipates that a stock will decrease in price during a set period of time. The trader realizes a profit when the stock and its underlying put option decrease in price during a set amount of time.
• Selling Puts – When you sell puts, you are selling someone the right to sell you the underlying asset at a fixed price, on or before the expiration date of the option order. You can use this options order when you are bullish on the market and feel that it isn’t likely to go down in the short term, you can sell puts on a quality asset that you would like to own at a discount.
• Selling Covered Calls – Selling a covered call is an options order where investors are willing to pay for the right to take a stock if it reaches a much higher price. It is an excellent strategy to implement while waiting for a stock to reach your identified sell point.
• Put Hedge – A Put Hedge is an options order comprised of buying puts during a bearish market to protect stock shares that, while the trader is reluctant to sell, are vulnerable to a decline in the market. Successful traders utilize strategies such as Put Hedges to insulate their portfolios from loss in a bearish market. This method also has the potential of unlimited profits, while at the same time limiting the potential loss by the investor.
• Calendar Spread – A Calendar Spread is an options order that involves selling an option with a date that is close to expiring against the purchase of another option, of the same strike price, that has a later expiration date.
• Selling Bear Calls – Basically, this options order strategy is to buy out-of-the-money call options and sell in-the-money call options on the same stock with the same expiration date. The plan is that the in-the-money stock closes lower than its strike price at its expiration date, and then the trader realizes maximum profits from Selling Bear Calls.
• Selling Strangle – This options order involves selling an out-of-the-money call option and an out-of-the-money put option with different strike prices on the same asset with the same expiration date.
• Selling Straddle – Similar to Selling Strangle, this options order is a technique that involves selling a call option and a put option on the same asset with the same strike price and expiration date.
• Buying Strangle – A strangle buy is implemented by purchasing a call option and a put option on the same asset with the same strike price and expiration date.
• Buying Straddle – A buy straddle is implemented by purchasing a call option and a put option on the same asset with the same strike price and expiration date. This is a desirable move because the risk is limited to losing the premium paid but its reward is unlimited.

Conclusion
There are quite a few more options orders available for your use; discussing your options orders with your broker can help to identify those that are available to you. Whether you are looking to capitalize on an upward movement of a stock or make defensive profits in a bear market, options are an excellent way to make money investing in the stock market.

Options Trading Plan – Mapping Out A Successful Future
Do you know the way to San Jose? The writer of this song seemed to be a little confused about where he was going. The same problem occurs in the commodities trading when investors decide to begin options trading without an options trading plan. It takes a great map to complete a long journey; this is also true in the options market when your trading rules help you to create a successful options trading plan.

What Is An Options Trading Plan?
An options trading plan is similar to a stock trading plan; it lays out the “terms and conditions” for making options trades. By establishing your options trading plan before you enter the market, you can unemotionally identify the types of investment strategies that you will employ and the trades that you will implement. Doing this before you begin options trading will protect you from the emotions that will grab you in the heat of the moment. Why is this important? It makes no difference if your trading is going well or poorly, there is a tendency to react emotionally. Emotions are a great thing normally, but they are of little help when you are making major money decisions with your investments.

Some things you might want to include in your options trading plan are:

• Initial Investment – This is important not only from the prospective of your options trading plan, but from a personal one as well. The good news is that options trading can be started with a very small amount of investment. While it is safer to start with the largest possible pool of risk capital, successful trading can occur with a small amount due to the limited risk nature of most options trading. For example if an investor starts out only buying calls, the potential of gains is hypothetically limitless while the possibility of loss is limited to the premium you paid for the call.
• Risk Capital – This rule is similar to investing in the stock market; your initial investment shouldn’t only be considered the amount you are willing to invest but the amount you are able to lose. This is the reason it is called “risk capital”. Risk capital is a sum of money you can financially bear to lose jeopardizing your standard of living. Not only should you be able to lose this money, you feel comfortable investing it as well. Think of your trading account as a business investment. It’s a fact of life that many businesses fail. If you aren’t afraid of losing your money you are more likely to make sound options trading plans.
• Step by Step Plans – Each trader needs a well-defined strategy in their options trading plan pertaining to the actual buying and selling decisions. Some people are very disciplined and able to remember the general principles of defensive investing while others need a plan for every scenario possible. It is better to define everything so that you have a quick guide if you are unsure or confused. Also you should be honest with yourself and evaluate your tendencies. This is not a character assassination; this is your chance to make a commodity trading plan that protects your investment, so be thorough and honest.
• Stop loss plans – While options and futures trading can have very limited risk, it always has risk. It’s doubtful that you want to think about losing money but now is the time to consider it. There are techniques that you can include in your options trading plan such as selling short that you need to understand before entering the market. These techniques will become part of your stop loss strategy so you need to understand them completely.
• Technical analysis – This is the backbone of any options trading plan. Through charting and research, an investor has the best view of which direction a stock is heading and why. Committing to a trading system like Japanese Candlesticks is invaluable to accomplishing your technical analysis due to its powerful charting principles.

Conclusion
These rules outline the things that are important in an options trading plan and everything else that you include must recognize these principles. With this options trading education, you are establishing your options trading plan so that you can be both educated and successful in options trading.

An Overview of Trade Options
If you search the Internet for “trade options” you will be flooded with two types of responses. The first will be “use my system to trade options and you will be insanely rich”. The second thing you will notice in your search results is that trade options and futures options seem to be linked together like two star-crossed lovers from a soap opera. While the two are similar, they are definitely different animals altogether.

Differences Between Futures and Options
The main similarity between trade options and futures is that both are “derivatives”, meaning that they have no independent value. Futures and options are contracts binding two parties and the terms of those contracts make the difference between the two.
A futures contract gives its buyer the obligation to purchase the asset in the futures markets and the seller to sell it at a preset date. If the futures holder liquidates his position prior to expiration, the delivery clause is voided, obviously.

By contrast, an options contract or stock order, whether it is a call (an agreement to purchase) or a put (an agreement to sell), gives the holder the right to trade options; in addition, the holder is entitled to simply let the option expire without investing further.

Options can be low-risk ways to make money in the stock market because many times you can exit a trade option that is unfavorable for only the price of the premium.

Types of Trade Options
Trade options cover in a number of different scenarios, offering the investor the ability to buy or sell and setting conditions for the transactions. The following are samples of the trade options that are available:

• Buying Calls – Buying a Call is a bullish position on an underlying stock value. The investor has the opportunity to speculate on the rise of the stock’s value for the term of the contract with a predetermined risk. Most investors will look to sell their contract at a profit, while others may intend to exercise their right and purchase the underlying shares.
• Buying Puts – Buying Puts is a bearish, somewhat speculative technique in which the investor anticipates that a stock will decrease in price during a set period of time. The trader realizes a profit when the stock and its underlying put option decrease in price during a set amount of time.
• Selling Puts – When you sell puts, you are selling someone the right to sell you the underlying asset at a fixed price, on or before the expiration date of the option. When you are bullish on the market and feel that it isn’t likely to go down in the short term, you can sell puts on a quality asset that you would like to own at a discount.
• Selling Covered Calls – Selling a covered call means that there are investors willing to pay for the right to take a stock if it reaches a much higher price. It is an excellent strategy to implement while waiting for a stock to reach your identified sell point.
• Put Hedge – A Put Hedge is the technique of buying puts during a bearish market to protect stock shares that, while the trader is reluctant to sell, are vulnerable to a decline in the market. Successful traders utilize strategies such as Put Hedges to insulate their portfolios from loss in a bearish market. This method also has the potential of unlimited profits, while at the same time limiting the potential loss by the investor.

Conclusion
There are quite a few more trade options available for your use; discussing your trade options with your broker can help to identify those that are available to you. Whether you are looking to capitalize on an upward movement of a stock or make defensive profits in a bear market, options are an excellent way to make money investing in the stock market.

Deciding On Your Investment Options
When formulating a trading plan for options, it is important to think about what approach you want to take in the options markets before you trade. It is important to develop an investment philosophy that reflects the strategy you have for your trading.

Understanding Options Markets Trading
Understanding the options markets is a product of understanding options trading. Options are an agreement between two parties where one agrees to sell a stock to the other party within a specific time period and for a specific price. Ownership as commonly defined does not apply since you don’t need to own a stock in order to implement a position.
A stock order, whether it is a “call” (an agreement to purchase) or a “put” (an agreement to sell), gives the holder the right to trade options. The holder is able to simply let the options order expire without investing further or go ahead and purchase the stock as agreed.

Preparing To Enter The Options Market
With an understanding of options the next step before entering the options market is to solidify your trading rules or your trading plan. These rules should include:

1. Verification – This is a critical part of the process. You would not want to drive a car that wasn’t inspected prior to you getting behind the wheel; the same principle is true with your trading plan.
2. Strict Guidelines – Your trading plan must be specific and precise. Having a tested, reliable trading plan we give you something solid when you hit a losing period.
3. Testing – you can successfully test your trading plan via paper trading on the Internet. Without testing, your trading plan is left to chance. Does it work or fail? Testing will give you the confidence you need to be a successful trader.

Basic Options Market Orders
The final step is to enter the options market and start trading. There are two basic kinds of options market orders, “Calls” and “Puts”. Calls are contracts made by a buyer offering the conditions under which he or she will buy a particular stock. Puts are contracts offered by sellers outlining the conditions under which he or she will sell a particular stock. Each contract consists of the following information:

• Purchase Item – This is the stock
• Strike Price – This is the price that is the target for the contract
• Expiration Date – The day on which the investment timing is no longer binding
• Quantity – Usually in groups of 100

These items are included whether the options market order is a Call or a Put. When buying a call, if the terms are not met, the contract is not binding. In addition, if the terms are met but the options market conditions have changed to make the deal unfavorable the buyer can simply let the contract expire and if desired, purchase the stock from the open options market.

Improving Your Odds In The Options Market
There is one more thing you can do to increase your odds of success in the options markets. By implementing a trading system like Japanese Candlesticks you will add a powerful charting system for your options markets investing. Candlesticks was invented over 300 years ago as a method for trading in the rice markets of ancient Japan. The system has become an amazing tool for today’s options markets. With the charting abilities you will gain from learning candlestick patterns, it can literally give you a clear view of the directions of options before they even move. Added to your trading plan, Candlesticks can help you to be a successful trader in the options markets.

Learn more about paper trading options as well as part of your options trading education.

Options trading provides a unique investment vehicle to even the beginner investing in the stock market and provides many advantages including leverage, limited risk, insurance and profits in bear markets.

Leverage
Leverage is the ability to “buy in bulk”. First, remember that in options trading you are not actually buying or selling anything. This is an agreement between two investors if a transfer of assets actually takes place. Also take note that when someone buys an option they pay an amount known as a “premium” to the seller; this premium is the cost of the option.

That being said, leverage in options trading occurs when purchasing options. In the U.S., options are traded with a contract multiplier of 100; this is the number of shares per option traded. With this contract multiplier, even small investors are able to trade a large exposure, or leverage, on a small amount of capital. Successful trading in this manner can be quite profitable.

Limited Risk
Limited risk is another tremendous asset of options trading. Whether you are learning how to invest in the stock market or you currently have limited funds to invest, options trading offers a perfect vehicle for your trading. When you are trading options, you have a great advantage over traditional stock trading because you can take a view on the market direction with limited risk while at the same time having unlimited profit potential. This is because option buyers have the right, not the obligation, to exercise the contract for the underlying at the exercise price. If the price is not right at the time of expiration, the buyer will forfeit his/her right and simply let the contract expire worthless.

Let’s have a little option trading education. We have decided to buy an option on MEW Industries with the following information:

• Company: MEW Industries
• Option Type: Call Option
• Position: Long
• Strike Price: $20
• September 8th

At the time of the trade, MEW Industries was trading at $25; the Call Option was trading at $6.50. This is known as the premium and it is the amount we paid for the right to possess this option. Therefore if we take into account the premium and the strike price, we will break even at $26.50; anything less would be a loss and anything more would be a profit. The beauty of options trading in the stock market is that if the stock price falls, we can simply allow the option to expire and lose only the premium. While this can be expensive, it is far better than being forced to buy one hundred shares $15 stock for $26.50 each!

Unlimited Profit Potential
Now you should be able to see how this type of options trading strategy gives you the best of both worlds; both limiting your risk and at the same time leaving you open to make unlimited profit if the market rallies.

Not all option strategies have this payoff benefit. Only if you are buying options can you limit your risk. For option sellers, this is the reverse – they have unlimited risk with limited profit potential. While this sounds very bad, once you understand the options available to you and how to use them, you can limit even the unlimited risk of a sell strangle! (if you don’t know this options trading strategy, click the link)

Insurance
There is another way in options trading to protect yourself and your stock portfolio; this technique can give the investor who is uncomfortable with exposing himself or herself to risk some insurance. Options such as a Put Hedge can insulate an investment even during bearish periods.

A put hedge is the stock option trading strategy of buying puts during a bearish market to protect stock shares that, while the trader is reluctant to sell, are vulnerable to a decline in the market. Successful traders utilize strategies such as a put hedge to insulate their portfolios from loss in a bearish market. This method also has the potential of unlimited profits, while at the same time limiting the potential loss by the investor.

Conclusion
Options trading is a valuable and unique way of learning to trade in the stock market as well as making consistent profits without tremendous outlays of capital. While there is risk with options trading, it is usually limited and it has the ability to make you quite the successful trader.

It is always nice when someone gives you something for nothing, an extra doughnut at the bakery or that tool you need. Other people want to give you something for free as well; an education paper trading options. Paper trading options is a process in which you can simulate the real decision-making process of options trading without committing real money.

You approach paper trading options the same as you would a real trade in the stock market, taking into account everything you would consider if you were making a real investment, and implementing your positions on the computer. By analyzing how your theoretical investments perform you can evaluate whether your stock trading plan and your technical analysis tools are working without the pressures of possible financial loss.

Why Paper Trading Options Is A Good Idea
Paper trading options gives you the opportunity to practice and learn without the financial danger of real losses. You can fine-tune your stock trading system, test it and improve your investment philosophy in theory before going live. You can learn stock market terms, techniques and practices without pressure.

It is also easier for you to test your trading rules in a simulated trading environment than in the real market. When you have actual money at stake, emotional reactions such as greed and fear can sometimes affect sound judgment. If you can resist those feelings and follow your stock investing system, and your paper trading options approach, later your live options trading will be much more successful.

A Little Explanation of Options
Options trading is different from typical stock market investing or bonds since you don’t actually own anything. In options trading, a stock option is not a physical thing like holding shares in a company. Instead it is a contract between two parties. When you own stock you actually own part of a company. An option is an agreement, or contract, where one party agrees to deliver something to another party within a specific time period and for a specific price.

This distinction is important because with options you are not borrowing anything. For example, in the case of stock, you must first borrow the stock if you are selling short; with options there is nothing to borrow so you can short options without the worry of borrowing first. Options are popular because they can help you leverage your positions, meaning that you don’t move on a few shares but hundreds or thousands. Instead of buying a stock outright, you can enter into an options contract which can be much cheaper but have the same, or even better, returns.

The Profit Potential of Options Trading
With options trading, you have the best of both worlds; limiting your risk and at the same time leaving you open to make unlimited profit if the market rallies. It is important to say that not all stock option trading strategies have the same payoff benefit. Only if you are buying options can you limit your risk. For option sellers, this is the reverse since they have unlimited risk with limited profit potential. While this sounds dangerous, once you understand the options available to you and how to use them, you can limit even the unlimited risk when you sell strangle.

Getting Started Paper Trading Options
There are a large number of companies on the Internet that offer free options paper trading; a simple search will give you more choices that you can imagine. These companies offer this service in hopes that after you get comfortable paper trading options, you will open a commodity account with them. In the meantime, once you have registered simply follow the directions of the stock market investing software and you are ready to begin.

What You Might Notice
If you try to implement positions before you understand options trading, you will probably be surprised; options trading has a different set of terminology, different strategies and even the trading software will probably be confusing. So before you try to begin giving yourself an option trading education; learn the terms, learn the techniques, and learn the stock trading software where you are paper trading options.

Does Paper Trading Options Really Matter?
In and of itself, paper trading options is not crucial; it is merely a simulation of the things required to trade options in the real world. What is important while paper trading options is your mental approach; if you treat this like a game or don’t understand the importance of learning options trading, you should seriously reconsider attempting to trade options. This is a skill and the consequence is losing your money so don’t take paper trading options lightly.

Conclusion
Getting something for free does not happen every day, especially in the business world. It is time that you put down that free doughnut and take advantage of this unique opportunity and start paper trading options today.

For more on options be sure to read the blog article options trading for beginners.

Options Trading For Beginners – Getting Started
No matter what you do in life there is always a first day. Walking as a baby, driving a car or starting a new job all fall into this category. This is true of beginner’s options trading in the stock market as well. Even if you have experience trading stocks you might not know the difference between a call and a put but don’t worry because this isn’t going to lead to a pop quiz. We will look at options trading for beginners and give you some of the basics to get you started. If you have never been exposed to options trading, welcome to your first day!

What Are Stock Options?
Let’s start our beginner’s options trading discussion with the topic of what options are not. Stock options are not ownership in anything; unlike stocks, the holder of an option does not possess part ownership in a company; this is simply an agreement between two investors that one party agrees to deliver something to another party within a specific time period and for a specific price. This eliminates the ownership part of the agreement as well as the idea that you must possess a particular stock in order to implement a position. Interested in selling short an option? In the stock market you have to borrow the stock to do it; in options trading beginners only need to understand that there is no ownership and no problem making the transaction.

What Are the Advantages of Stock Options?
Options have a number of nice advantages that options trading beginners should understand. Among these benefits are:

• Leverage – Options also have the advantage of leverage. Your option is purchased with a multiplier of 100 so your fortunes are affected by 100 shares of stock and not only one.
• Limited Risk – This is not true of all options investing, but overall options trading does have limited risk. When buying options, your risk is limited to the price of the premium, or the amount you paid for the option. For example, if you buy straddle (the name for a particular option) and the price of the stock is wrong for your position, you can, in essence, allow the option to expire. This offers a great start in options trading for beginners since they can purchase options without the fear of staggering losses.
• No Risk Paper Trading – Thanks to the power of the Internet, paper trading options has become a valuable asset for the options trading beginner. You simply register to use the software and follow the directions of the site. You will be able to implement positions and see the effects of your decisions on your “account”. Lose your money? No problem, it was only virtual money but a real experience beginner’s options trading.

What Do You Need To Do To Get Started?
Getting started is never really difficult. Remember, it is your first day. However, there are several things you need to do as a beginner in options trading:

1. Start Learning – There is no substitute for education. Read books about options trading, talk with others that trade options and search the Internet for information about options trading. Once you start investing your own money, you will be glad to understand options trading.
2. Create a Stock Trading Plan – This is just as important as your education. You need to outline your goals and objectives as well as your strategies in an unemotional manner. This way, when emotion tries to creep into your decision making process, you will have already decided your course of action.
3. Select a Broker – This is a personal, but important part of the process. You can implement your own trades but you need someone to actually place the orders. Some full-service brokers offer more services and most Internet brokers offer lower commissions. Even though you’re a beginner in options trading, define what you want from your broker and find someone who meets your needs.
4. Use Japanese Candlesticks – This powerful charting system will help not only the beginner in options trading but is valuable to the “expert” as well. Candlestick patterns help you to find the trends in the market that most others miss.

Conclusion
Have enough information for your beginner’s options trading lesson? Remember that this is your first day but everything you do will build off of it.