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On Wed, 13 Mar 2002 20:11:45 -0800, Sean Cassidy <scassidy@xxxxxxxxx>
wrote:
>So i was thinking options are a good way to go. Cany anyone advise me of the best way to trade them.....in a simple easy to understand way?
I was in your same position a few years ago. You are very definitely
make the correct next step.
You didn't mention your source of options data, nor your system
platform. Knowing the bid-ask real time is going to be something your
going to want. That subject in and of itself is important. Here is
my suggestion(s) for getting started:
Parallel trade your equity trades with paper-trading the options by
pasting the bid-ask of strike prices near your entry price into a
spreadsheet or even Wordpad. When you are entering a trade you will
want to have the least amount of distractions---by pasting you will
avoid having to spend time writing them all down while you still earn
money by your current method of trading. Later when you aren't
feeling like a one-armed paper hanger you can organize your data. You
will want to make note of the average daily volume of your equity and
the open interest of the options you have selected. Options
Laboratory is (or was--it has been a while) is a bit of software that
would help you get some idea of what your option should be worth if
you can do a good job guessing the time and price at which you are
going to close your equity trade. I think the CBOE also has a free
toolbox that will help you out.
Given your time in trade I would suggest looking at both this month
and next month expirations. You will learn a great deal about trading
with options that are near expiration.
There are lots and lots of books on options, but what I have outlined
for you will give get you up to speed very very quick while you are
reading the books. At some point you will be confident enough in the
outcome to go ahead and do it. Reserve market order entries for very
liquid options, if you use them at all. You will also find that
overcoming the bid-ask and commission spread before you have a profit
is a lot tougher using options than equities. My profitable, but
squeaker equity trades were sure-fire loosers with the options.
Sorry to be so verbose in answer to a request for simplicity.
Fred
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