Should You Trade Options

There are a lot of hype around opportunities for trade, and with good reason, it is a good way to do a lot of cash quickly, or can be used to grow your capital consistently month after month. 

There is also a lot of hype about how complicated it is and why you need to spend thousands of dollars on options trading education before you begin. Clearly this last statement usually comes from commercial seminar companies trying to sell their course on options trading. 

Let’s cover some of the most basic of opportunities for trade and set you straight on a few important points. Firstly, yes it is true that you can do a lot of money trading options, but of course you can also lose money just as quickly. 

When trading stocks your leverage is 1:1, if you go on margin you can get 1:2 leverage, but that’s about it. With options that are not so straightforward to calculate the leverage, but generally you can get between 1:5 and 1:10, when you buy an option on a stock or ETF. 

Then with 1:10 gearing, when the stock rises by 5% your choice to increase by about 50% and it can happen within a few days, this is why swing trading strategies using options on stocks is so popular. 

But the disadvantage is that large losses can also occur if the stock falls by 5% your option can also decline by 50%, after which you can choose to close the trade and save some of your selections value, it really depends on what your stop loss and risk. 

What we have just described is called directional option trading, where you bet on getting the direction of stock movement correctly, this is highly speculative. Options can also be used in solution strategies that are not much more directional, which included low traffic, credit spreads and Iron condors. In these industries, much less dependence on the stock to get the correct direction, but it still matters. 

So should you trade options think you should not directional option trades until you become very good at trading stocks. This is because you must be very precise with your entry and exit strategy and trading plan and be very good at technical analysis. 

Whereas, if you want to make non-directional option is you do not have to be such an experienced stock traders to be a success, but of course it does not hurt either. 

Learning to deal options is a very useful skill you have, but do not rush into it and blow out your account. Make sure you get a good choice for trading education before you start, and also ensure that you have a very solid stock trading education, and so one of Top Dog Trading Review.