For more information about online options trading, brokerage reviews and the latest promo codes, visit Options Trade Reviews online at http://optionstradereview.com/
2. Adding Options to Your
Investment Portfolio
Powerful personal computers
and high speed Internet
connections have made online
trading of multiple financial
instruments accessible to just
about everyone. It is possible to
generate a supplemental or
primary income from a home-
based office with very little in the
way of a capital investment.
3. Adding Options to Your
Investment Portfolio
Online brokerage houses do
everything in their power to attract
new customers to participate in
what is known as “retail trading.”
The competition for customers is so
intense that many brokers will
supply a promotion code that
entitles customers to certain
benefits. A couple of typical
promotions that brokers offer will
include a certain number of
commission free trades or a very
low-cost commission rate.
4. Adding Options to Your
Investment Portfolio
There are other promotions that
reward customers for making a
specific number of trades or
reaching a certain dollar volume
level. Many brokerage houses
will often supply a promotion
code that will reimburse a
customer for any fees imposed
when switching brokers.
5. Adding Options to Your
Investment Portfolio
One area where retail trading will appeal to those
who are new to online trading and want to take a
cautious, conservative approach is options trading.
6. Different Available Types of Options
Options are available for
stocks, bonds and commodities.
Options are also available on
financial indexes such as the
Dow, S & P, and many foreign
exchange products. Options can
also be traded through some
brokerage houses on precious
metals, energy futures, and
agricultural products such as corn
and cattle.
7. Buying a Call Option
Purchasing a call option contract
gives the buyer the right, but not
the obligation, to purchase a
financial instrument at a pre-
agreed upon price within a certain
period of time. This is the simplest
option strategy, one that is used
by many successful option
investors.
8. Buying a Call Option
If the value of the selected
instrument increases, the option
buyer will “exercise” the option. If the
price does nothing, or declines, the
option buyer will do nothing,
allowing the option to “expire.” The
entire risk the option buyer will
experience in this case is limited to
the “premium” paid for the option.
9. Buying a Put Option
This is the same in terms of risk to
buying a call option. The difference
is that the buyer of the put hopes
that the value of the underlying
financial instrument will decline
instead of increase. The ability to
sell options was at one time
restricted to large financial
institutions such as banks and Wall
Street brokerage firms.
10. Buying a Put Option
Now, this ability is available to anyone, as long as
certain requirements are met. These will vary
according to the broker selected and the trading
exchange involved and should be studied carefully
in order to understand the rules and risks.
11. More Complex Option Strategies
Call and put options can be combined in
hundreds of ways. One simple, yet effective
example of this involves buying two call options
and selling one put option. The trader employing
this strategy pays a premium for the two call
options, but receives a premium for selling the put
option, which helps to reduce the price of the
trade. This strategy has the colorful name of “Bull
Call Spread with a Naked Leg.” It is one of the
simplest of all the multiple option strategies.
12. Options Trading Education
Even traders who have used
option strategies for years will
continue to learn in order to stay
current with the changes that
take place as a result of the
natural evolution of the financial
markets. New traders should
take the time to study options in
order to clearly understand the
risks and rewards that options
trading presents.
13. Options Trading Education
It should be thought of as a
continuously ongoing process
that leads from the first tentative
beginnings to the ability to create
personal options strategies that
best suit an individual’s trading
style and goals.
14. Further Reading…
For more information about online options
trading, brokerage reviews and the latest promo
codes, visit Options Trade Reviews online at
http://optionstradereview.com/
