Stock Option Basics: Becoming An Options Trader

Understanding Why Stock Options Are Important and Why You Are Using Them Is The First Step To Successful Stock Option Trading

Welcome to TheOptionClub.com Stock Option Tutorial.  You will receive a continuing series of e-mails from us, introducing you to differing concepts about stock options and how they can be used responsibly to enhance your investing and trading experience.

The first place to start with your options education is to develop a clear understanding of why you are here.  Many people are drawn to options because of the leverage and corresponding profit potential they offer, others are seeking to generate income, and some want to protect their investment portfolios or enhance their return.

There are numerous option strategies and many ways they can be used.  If you clarify your goals, it allows you to focus upon those strategies and techniques that are best suited to your needs.  For example, if you are looking to enhance the returns from an existing stock portfolio you might focus your efforts upon a covered call strategy.  You would consider other strategies if you were concerned about protecting your portfolio from a market downturn.

As you progress with your stock option education, you will reach a point when you feel ready to begin using options within your portfolio.  In preparation for that day, you will want to consider which brokerage firm you want to place your account with.  Options trading is vastly different that the simple buying and selling of stocks or mutual funds and not all brokerage firms are adept at processing complex option orders.

We work with the leading option brokerages in the industry, so do not hesitate to jump onto our discussion board and ask our opinion.  The two brokerages that we presently favor are OptionsXpress and ThinkOrSwim, both of which offer very competitive commission schedules which are further discounted for subscribers to our newsletter.

Before you begin trading options, you should read a document entitled Characteristics and Risks of Standardized Options, which contains basic information about options and examples of the risks involved.  This document is available as a free PDF download from the Options Clearing Corporation's website.  We will also refer you to other resources that we feel carry significant value, but caution you that not all material will be appropriate for your individual goals.  By establishing an understanding of what you hope to achieve, will help you make informed decisions about how best to proceed in furthering your stock option and options trading education.

As you learn more about stock options, you will begin to see the truly amazing flexibility they bring to your investing and trading, as well as a tremendous ability to adapt to changing market conditions.  You are not likely to "get rich quick" but with some discipline and determination there is no reason why you should not be able to achieve your financial goals.

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