Online option trading allows an individual to participate in the trading of stock options from virtually any location – provided they have a computer and Internet connection. Online trading has become the most commonly used means by which options trading is conducted; superseding traditional floor or telephone based trading. For anyone wishing to become involved in online option trading, there are several areas that should be considered prior to beginning trading.
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Basics of Trading Options Online
The first step for anyone starting off trading options is to gain a solid basic understanding of what options trading entails, and the benefits and risks of trading options. There are many articles about options trading available at this link, but the article you are reading now gives an overview of the subject.
Trading options involves buying a contract which gives the trader the right, but not the obligation, to purchase an amount of the shares on which the option is based during a set period of time, at the end of which, the option expires. The premium (cost paid for the contract) is a fraction of the price of the stock, meaning that the trader can control an amount of stock for a fraction of the cost of actually purchasing the shares.
There are two main classes of options; call options which rise in value along with an increase in stock price, and put options which gain value when the stock price drops. This is one of the great benefits of trading options – it is possible to make money even when stock prices are falling.
During the life of the option contract, if the share price moves as anticipated, the trader may decide to sell the option at a higher premium before expiration, immediately realizing a profit.
The risks of trading options are primarily limited to the risk of losing the premium paid and the fees incurred if the price does not go the way anticipated. This potential loss can be reduced by using a stop loss order, which automatically triggers an order to sell if the price reaches a certain point which is predetermined by the trader.
Getting Started With Online Option Trading
With a basic understanding of what options are, the next thing that is required to begin trading options online is to set up the necessary facilities that enable trading online. A trader needs an online trading account with a company, or brokerage, that offers a trading platform suitable for options. When selecting a broker, a trader needs to consider the costs, fees and account minimums as well as the quality of options trading platform features and usability, and additional tools offered for research and analysis.
Selecting Options to Trade
When trading options, a vital part of the process is deciding which options to invest in, when to enter the trade, and when to exit. The best way of determining this is by studying the stocks on which the options are based, in order to select options that are being offered at a fair price, and which have a high probability of increasing in value.
There are many forms of analysis which can be applied in order to assist a trader in judging which options present a good opportunity to make a profit. Analysis also helps to pinpoint the time at which a profitable trade can be entered, and to determine the best point at which to exit the trade.
If you lack the experience, time, or desire to undertake this research yourself, a solution is to let Stock-Options-Made-Easy do it for you by using our membership service. Options trades are selected, entry and exit parameters are set, and clear and easy instructions are sent straight to your in-box.
With the ease and availability of technology and the facilities and information provided by online trading companies and research services, becoming a part of the exciting and rewarding world of online option trading is literally right at your fingertips.
”Success is simple. Do what's right, the right way, at the right time.”
Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.