Getting Started With Options? Here's How!
If YOU are a new trader, this is what you need to do to get started Today:
- Study, Study, Study: Go to CBOE Options Education Center or Investipedia OR Investipedia Options University and start studying the tutorials. You will need to log in with a signon at CBOE although it is free. Investopedia tutorials are completely free with NO sign on required.
- Memorize Basic Terminology: Bookmark and start learning these Options Terms. You will want to save this link as a great "dictionary" for options trading. Obviously you wont need 90% of this, but its there if you ever need to look up a definition. We STRONGLY suggest that you take a full week to learn the terms and nomenclature of Options trading.
- Sign Up for Level 1 and Level 2: With your existing broker, sign up for level 1 and level 2 Options Trading. At this point this is ALL you need! If you have an Ameritrade account, you can get TOS for free. TOS is a one stop site for ANYTHING pertaining to options, however because of that it can be a bandwidth killer and is slow and cumbersome at times. Diamond Members of OM, we have three separate TOS videos available under the Diamond Training Video Library.
- Look for a Virtual or PaperTrading Options Site: We highly recommend OptionsHouse.com or ThinkOrSwim. If you have an Ameritrade account, you can get TOS for free. TOS is a one stop site for ANYTHING pertaining to options, however because of that it can be a bandwidth killer and is slow and cumbersome at times.
- Start Small: We highly recommend that you begin trading options with a small CASH account of $1000-$1500 dollars. If you use your existing brokerage account and that account is a margin account (Under $25,000) you WILL be hit with the Pattern Day Trader (PDT) Rule so just DONT DO IT. EITHER change your account to a CASH account OR open up another brokerage account with an Options broker and channel $1000 into the new account.
- Once you have done all the above you are now ready to begin Paper Trading which we will discuss in the next chapter!
As you can see, getting started with options requires a little effort on your part. But the potential reward is well worth your time and effort!