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Trading Options Is Not The Same As Trading Stocks

By Edited May 11, 2015 0 0

Most people have the belief that trading options is a very risky think to do. If you offhandedly tell someone that you are considering getting into the options market, you will most likely be met with both looks and comments of concern from your acquaintance. After all, many people lose big bucks with options, right?

options stock

The truth of the matter is that there are many people who do end up losing a lot of money with options. A lot of people who get into trading options do so after going through a very brief seminar. These folks are often captivated by the stories of quick profits that can be made with options and then go home and jump into the options market as quickly as possible. The sad reality is that the majority of these people ending up losing most, if not all, of their initial investment and quickly sour on trading options.

It's very clear to experienced investors that trading stocks and trading options are not the same thing. Options don't react to market changes the same way stocks do. If a stock increases or decreases in value, that doesn't always mean the stock's option will do the same. Such things as volume, option expiration date, and other factors all contribute to an option's price change. Many people would probably consider options to be an excellent addition to their portfolio if they would only take the necessary time to understand what makes them tick.

If you would like to learn more about the dynamic investing field of trading options, it is highly recommended that you read through a good book on the subject before jumping in. A weekend seminar on trading options simply isn't going to cut it. One good book that you might want to consider is "Understanding Options," by Michael Sincere.

Another thing you will want to think about is acquiring an options trading software program for your computer. Although there are many such programs to choose from that vary widely in price, don't be too quick to discount the free tools that are now provided by the online brokerage companies. If you simply create and fund a trading account with any of the great online brokerage companies, you can have instant access to some truly powerful analysis tools.

Lastly, you should take the time to practice your options trading strategies before putting any of your own money in a live trade. This is very easy to do. You can easily create a practice trade account with your online brokerage company where you can "practice trade" in real time.

Trading options can be an exciting and potentially lucrative addition to your portfolio. Always take the time to learn all you need to know about this market before diving in.


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