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How to Trade Options – Options Trading Basics

Options Trading BasicsAll investors should have a portion of their portfolio set aside for option trades. Not only do options provide great opportunities for leveraged plays; they can also help you earn larger profits with a smaller amount of cash outlay.

What’s more, option strategies can help you hedge your portfolio and limit potential downside risk. No investors should be sitting on the sidelines simply because they don’t understand options.

This Guide to Options Trading Basics provides everything you need to quickly learn the basics of options and get ready for trading. So let’s get started.

What are Options? – How to Trade Options
— Two Basic Types of Options

What are Options Contracts? – Hot to Trade Options
— Premium
— At the Money, In the Money, Out of the Money

Price of Options – How to Trade Options
— Strike Price

How to Read Options Symbols – How to Trade Options
— Options Symbols

How to Price Options – How to Trade Options
— Stock Price
— Time
— Volatility
— Bid/Ask Prices

How to Read Options Quotes – How to Trade Options
— Open Interest and Volume
— Expiration Cycles
— Expiration Dates

Understanding Options Risk – How to Trade Options
— Time Isn’t Necessarily On Your Side
— Prices Can Move Very Quickly
— Losses Can Be Subtantial on Naked Short Positions
— Other Common Pitfalls

Common Options Mistakes to Avoid – How to Trade Options
— The Price Tag Problem
— Fear and Greed
— Allocate Correctly

Options Trading Strategies – How to Trade Options
— Buying Call Options
— Buying Put Options
— Covered Calls
— Cash-Secured Puts
— Credit Spreads
— Debit Spreads

Choosing an Options Broker – How to Trade Options
— Margin – Getting “Approval” to Trade Options
— Options Approval