Join the Options Trading Club

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Option trading is steadily becoming more popular, says options trading information. Trading volume sets records year after year, and some of the growth has been spectacular. 2009 was an exception, but volume is expanding once again in 2010.

From the Options Industry Council (June 1, 2010):

“A new monthly total options trading volume record was set in May with 405,860,027 options contracts changing hands, a 28.93 percent increase compared to May of last year when 314,799,038 contracts changed hands.

“This also marks the first time in history [that] monthly volume surpassed 400,000,000 contracts. Additionally, May recorded four of the ten highest volume days for both total options and equity options with May 6 becoming the highest volume day on record with 30,818,984 total options and 28,246,561 equity options traded.”

Options Trading Volume

There are many investors who have become afraid of investing because of market volatility. But options can be used to reduce exposure to big market moves. You owe it to yourself to learn how to adopt option strategies to reduce the risk of investing.

However, I will issue this warning: It’s tempting to use options as a risk-enhancing (i.e., gambling) tool. Please avoid that trap by taking the time to understand what options are and how they work before you begin using them with real money.

There are several good methods for getting that options education:

1. Free webinars are offered by:

  • Various options exchanges
  • Your broker
  • The OIC

2. Books provide good information in compact format

I recommend The Rookie’s Guide to Options, which I wrote.

3. Paper trading

Some people scoff at this idea of paper trading, but it affords a hands-on learning experience, and your broker probably offers a free practice account.

There’s also another form of options education that I have been a fan of for a long time, and I posted on the topic on my blog, Options for Rookies.

Join the Options Trading Club

Are you someone who prefers to learn in a group environment rather than by yourself? If so, I’d like to suggest that you find a few friends, coworkers or family members and form an investment club.

For each meeting, assign one or two people to sit through a webinar and report back to the group. It’s an efficient method for learning together.

Open a paper trading account and follow some specific trades. If you can meet weekly, there will be a great deal of interest in both position management as well as new learning opportunities.

As you try different strategies, you will discover which feel most comfortable for your group. You may prefer very conservative methods where preserving capital comes first. If you are more aggressive, you can adopt option strategies with a better chance to make profits — and with less risk — than buy-and-hold investing.

Follow Mark Wolfinger on Twitter @MarkWolfinger.


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Article printed from InvestorPlace Media, https://investorplace.com/2010/06/learn-to-trade-options-with-an-investment-club/.

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