Chapter 4: How to Get Started with Options Trading

One of the hardest parts of options trading is actually getting started with it. You will need to take several steps if you want to start trading and each of these steps will require you to do different things. The great part about stock options and options trading is that you will be able to use the previous starting points that you had with options trading if you ever make the decision to start a new type of trade. There are many different things that you can do when getting started out with stock options trading, and it’s important that you give all of them ample thought.

Understand Your Goals

You should know what your objectives are before you start options trading. This is to help you have a clear idea of where you want to be when you are getting started, so that you can make sure that you are making all of the right options trading decisions for you. It can sometimes be difficult to know what you want to get out of stocks and trading.

Do you want to make a little money on the side? Do you want to replace your full-time income? Are you hoping for passive income?

Each of these things will help you to have a better understanding of the ultimate goal that you have in mind. You need to make sure that you are on the right path to get that which you want when you are looking at the different paths within an options trading career.

Try Strategies

There are several different strategies that will help you to have a better understanding of the way that options trading works. Following these strategies can be complicated at worst and stupidly simple at best. The majority of the strategies that people use for options trading are outlined in this book so that you can follow them and make sure that you are getting the best experience possible with trading.

Choose the one that best lines up with your capabilities and with the end goal that you have for your trading. If you know what you want to do with options trading and if you work to always make sure that you are getting to that point, it will be much easier for you to figure out the specific steps that you need to take while you are trading.

Always Use a Broker

Having a broker is one of the only ways to ensure that you will be able to be successful with options trading. A broker can not only help you get the best advice that you need for trades, but he or she will also help you to figure out where you need to go with each of the trades that you have. It is a good idea to try different things that the broker suggests and to make sure that you are going to be able to use these options when it comes time to trade. There are many different aspects of trading so be sure that you are paying attention to all of them.

The broker will not only be able to help you figure out what you need to do with trades and with the options contracts that you have but will also be able to help you figure out if you meet the requirements for being able to get involved in options trading.

Can You Participate?

There is a chance that you may not be eligible for options trading. About 30% of people who have the goal of options trading are not actually able to do the trades that they want to do. There are different factors that go into determining your eligibility, but the majority of them have to do with risk. If you are deemed to be high risk, if your portfolio is not large enough to satisfy the requirements, or if you show that you are somehow not able to fit options trading into your portfolio in a way that makes sense, you will not be able to participate in options trading.

Just like with other parts of trading, things can always change, though. Keep that in mind when you make the decision to try new things with options trading. You will be able to try new things, and you can even change your eligibility with time.  Eligibility for options trading, indeed, is something that everyone can work toward.

Before you make the decision to invest in options trading, always check with your broker to make sure that you are eligible to do it.

The Trading Account

Once you have determined whether or not you are eligible for options trading, you will then be able to start your trading account. This is generally different from a traditional trade account in that it is a margin account. You can make sure that you are doing everything right with options contracts by starting up the margin account before you put the money into the stocks. It is a good idea to know what kind of account you are going to have and what the initial investment is going to look like for you when you start out with any sort of trading.

If you do not already have a margin account, you will need to talk to your broker about it. This is where all of the options trading actions will occur so you need to make sure that you are making a worthwhile decision about your trading account. This will essentially serve to make sure you’re getting the most bang for your buck. You can also make sure that you are getting the best experience possible when your broker starts your margin account with you.