An emailer by the name of Daniel asked: My question: Is “Essentials Of Trading” applicable to trading options? I was looking at trading options The answer is yes - in two ways. The first way my book is applicable to trading options is in the fact that it focuses on the foundational elements of trading in general. At its core, trading options is no different than trading any other market. You need to understand the mechanics of trading, price movement, and tracking your P&L. You need to have a strong trading plan...

A former classmate of mine from my undergraduate days (he and I were officers for the Finance Club once upon a time) sent me a question about option trading. I want to get your thoughts on something – A covered call option that I wrote is now at the money with expiration in Jan. I planned to sell it in the new year so this is fine. Logically, it shouldn’t be exercised early but I’m not sure it will hold in practice? So, if the option is exercised early will I have a chance to settle for cash? or buy an offsetting option...

It’s ranting time! There’s a certain blogger out there who’s only purpose for posting (seemingly) is to sell his trading guide, or whatever he calls it. I’m not even sure why I bother to look at his posts. It must be to occassionally get me pissed me off at his hubris and ignorance enough to turn his foolish blathering into an educational post here. The latest entry (I’m not going to do him the favor of linking to it and helping his page rank) is full of nonsense like this bit here: There are certain...

How much capital is required to trade is a question which crosses just about every trader’s mind somewhere along the way. It certainly comes up in questions on trading forum sites frequently. I actually got a fairly specific version of the minimum funding questions yesterday by and emailer. How much is needed to start trading options? What things should I be considering before going ahead? There are a few general things which come in to play here: How many positions will you have open at a time? What is the price level...

I got this broker question the other day. The single most important question would be what broker do you use to trade your personal money(not a demo account)?  Secondly who would be someone there to contact you personally deal with? For stocks and options I still have the original brokerage account I opened lo these many years ago. That’s with Charles Schwab. I’ve never seriously looked at anyone else because I’ve been satisfied with the service and all of that, so I was never motivated to make a switch. I’ve...

In keeping with the recent theme, here’s an option trading question I received over the weekend. Hello John, Your book is great and has helped me a lot. But now, I’d like to get more into options. As your book put it – put the pedal to the metal. I’ve read a few books on options already. But, I have a problem. While they all go into the intricacies of what options are, the greeks, and some trading strategies, none of them really have a how-to aspect to it. Specifically, I am looking for how to close out...

A fellow trading blogger wrote some things which really irked me. I’m not going to say who it was or link to the post as I normally do because basically all the guy does is plug his trading system in every post. He’s been on a multi-post rant about how people shouldn’t trade options or futures, or any other leveraged instrument for that matter. Two of the quotes this individual made in one of his recent posts in particular caught my eye. With options trading, you need really good money management skills and...

Beanieville posted Don’t Let All Those Technical Analysis Gurus Confuse You on Tuesday with the primary suggestion being that one should keep things simple by avoiding derivatives and leverage, and a secondary one to keep your analysis relatively simple. The title obviously only applies to that second point, but I think the general message that less complexity is better for most traders is a good one. In particular, there’s a quote that goes: “If you’ve been to some options or futures trading sites most...

I know a lot of people are interested in options and see the potential they offer in many ways. I also know that a lot of people don’t really understand them, or think them too complicated. I’ve used options in a very simple, very basic way for several years now, though. It’s easier than you might have been led to believe.   Last year I put together a video titled Easy Stock Option Trading which goes through the basics of the option market. It also specifically outlines my own strategy for using them in...