Learning options the proper way

For those who are reading this blog and wonder how to learn options, below are some tips:

There are many option programs in the market. Many of them are selling like time share condos or multi level marketing products making unrealistic promises and expectations.

The best way is to choose a program that teaches clearly the underlying principles behind options and how you trade. it. These principles which can be very powerful if you use it properly. If used wrongly, options can be dangerous.

Many of options programs offered in market appeal to greed, often directional in nature, and tempting students to use options to make quick profit.They will fail eventually. It is highly dangerous. Some uses their own software to predict the market. It seldom work. The market is too complex. Only way to learn is to understand the basic fundamental principles thoroughly and then trade according to your risk profile and personality. There are no short cuts. It takes focused effort and determination.

On the other hand, it is not so difficult. Any person with a basic understanding of elementary algebra and intelligence should be able to acquire the skills. More important is the discipline and humility to admit that Mr Market is a complex animal often unpredictable. We need to build clear edge when trading the market. Proper option strategies acknowledge that the importance to control your emotions ( greed and fear ) is as important, or often more important that getting the direction right. A good part of it is a game of probability although fundamentals are important longer term. In summary, success in trading is the combination of fundamentals, sentiments ( measured by technical analysis ) and the ability to control your feelings.

Choose a course that allow you effective interaction with the coaches and students for a period of 6 months to one year while you learn the different strategies of using options. You cannot learn options in a 3 days course. You can learn the principles and fundamentals but not acquiring the skills.

It is better if the coaches have different styles of trading but using the same underlying principles when they trade. Ask if the coaches use real account and trades over time. They must be clear ways to verify their performance over time. Do not trust their testimonials or promises. Set the objectives of the skills you need to acquire and see if the course provide the training.

Do not trust the money back guarantee. I know of a reputable Option Training organization that promises money back warranty if you fail to make money on the market. But when it comes to refund, it is not easy. The conditions are stringent. You can read some of the lawsuits and review on the Internet. It is nice nowadays that many organization cannot hide their questionable practice because information is transparent and instant on the net.

With a real portfolio ( even if it is paper trading), you can see all the various mistakes they made trying to predict the market. If they can be wrong 50% of the time and yet made money, then it is verified they know how to use options to safely hedge their positions, repair their trades and balance their portfolios.

As far as I know there are not many options training organization that provides this level of education and transparency. If there are courses that offer this level of education, it probably cost a lot.

Through the course, you need to develop your own style of trading using the same underlying principles. The important thing is that you have to develop your own trading style in alignment to your personality, time availability, habits and risk profile. The style will allow you to trade in the zone where you can confident and consistent in your performance. It will remove fear, greed and turn market volatility to your advantage

"Stop loss" is tool traders use to preserve capital. It is a necessary evil. It can drive you crazy emotionally because often the market will whipsaw on you.. Also, it does not protect you if there is a flash crash like the one experienced at the beginning of May this year.

Once you learn to use options, You can stop using "stop loss". You can make money not only when you are directionally right but also when the trend is stagnant or slightly bullish or bearish. You can also make money when you are wrong if you know how to repair the trades. Indeed, you need to right only about 50% to make money provided you keep to the discipline of hedging. You take care of the risk and the profit will take care of itself.

I traveled for 3 months this summer with little time to monitor the market and at times no access to the internet. I was not fearful what the market will do to my portfolio. I know how to protect my positions. When I came back, my portfolio was positive despite a huge loss in May and June at the market.

Some may think that this is too good to be true. Be not mistaken, it involves hard work, commitment, real motivation and time. It is not a black box system or
software or market prediction or stock picking tool. It is trading based on sound principles. Proper option trading instill good discipline - a major factor to success.