Virgin to option trading

amtrader said: "Hi, I'm new to option trading and I want to practice with a piece of option trading software that gives prices and option chains for the CBOE. I'm european so I'm not too familiar with American stocks. I'm looking for "option friendly" stocks, ie. stocks that have option chains and preferably of large blue chip company. I want to see what spreads look like on those. Could someone give me 5 volatile stocks (trending up or down) and 5 stocks trading sideways please. Any help and advice would be much appreciated."

Dark Horse said: "I'm interested in trading options for the Dow. I believe the symbol is DJX. Is it possible to trade these online? If so, what is the best place to do so? And does that type of trading allow me to buy and sell at the times of my choice, or am I locked in for set periods? Thanks."

jasonnoguchi said: "[QUOTE=Dark Horse]I'm interested in trading options for the Dow. I believe the symbol is DJX. Is it possible to trade these online? If so, what is the best place to do so? And does that type of trading allow me to buy and sell at the times of my choice, or am I locked in for set periods? Thanks.[/QUOTE] In order to trade options for the Dow, you need to buy options on the DIA, which is the ETF tracking the Dow. You can do so as simply as by opening a trading account with any of the online brokers at [URL="http://www.optiontradingpedia.com/option_trading_brokers.htm"]http://www.optiontradingpedia.com/option_trading_brokers.htm[/URL] and then making sure you understand what call and put options are at [URL="http://www.optiontradingpedia.com"]http://www.optiontradingpedia.com [/URL] Hope these helps."

LongArm said: "[QUOTE=jasonnoguchi]You can do so as simply as by opening a trading account with any of the online brokers at [URL="http://www.optiontradingpedia.com/option_trading_brokers.htm"]http://www.optiontradingpedia.com/option_trading_brokers.htm[/URL] and then making sure you understand what call and put options are at [URL="http://www.optiontradingpedia.com"]http://www.optiontradingpedia.com [/URL] [/QUOTE] I'm sorry, what was the name of that website again? :th_gives:"

thezster said: "[QUOTE=LongArm]I'm sorry, what was the name of that website again? :th_gives:[/QUOTE] I tried it 6 times and couldn't get on... do I need a secret handshake and/or password.... ???????:signs053:"

Dark Horse said: "I have experience in regular trading, but none whatsoever in options. Can options be traded at all times? I'm confused by the once-a-month dates I've seen. I'm basically looking to buy and sell, or sell and buy, in periods within two weeks. So is that possible at all, and if so, is there enough liquidity to do so? Many thanks."

MSCantrell said: "[QUOTE=Dark Horse]I have experience in regular trading, but none whatsoever in options. Can options be traded at all times? I'm confused by the once-a-month dates I've seen. I'm basically looking to buy and sell, or sell and buy, in periods within two weeks. So is that possible at all, and if so, is there enough liquidity to do so? Many thanks.[/QUOTE] Do you mean the expiration dates? The expiration is part of how you identify a particular option. For example, you could buy a call on, say MSFT that expires in June, or a call that expires in July, or a call that expires in August. They're different- different price, different symbol. You CAN trade options any time, if by "any time" you mean any time the exchange is open :) Just like stocks, you can enter orders after hours, but the order won't be filled until the exchange opens the next day. Liquidity is similar to stocks: very good on big names, not so good on the obscure ones. Another thing to watch out for: not all stocks are optionable! I'd recommend grabbing a copy of [U]Options Made Easy[/U] or some other beginner's book, to get an introduction all at once, rather than one question at a time :) Mike"

drdan said: "Dark Horse - You need to become educated in options before you start trading them. They are a different beast than trading stocks. If you do not even know that options have expiration dates you do not need to be trading them. YOU WILL LOSE - BIG TIME! The reason most people say that options are risky is because they lack the knowledge to trade them and so they are right options are risky if you do not have the knowledge to trade them. To answer your question - yes they can be traded within two week time periods, they can even be day traded. If there is enough open interest or you are willing to risk playing a market trade instead of a limit trade you can get in and out very quickly."

Dark Horse said: "[QUOTE=drdan] To answer your question - yes they can be traded within two week time periods, they can even be day traded. If there is enough open interest or you are willing to risk playing a market trade instead of a limit trade you can get in and out very quickly.[/QUOTE] I'm fully aware that I don't understand options sufficiently to trade them, which is why I'm asking the 'dumb' questions. ;) All I really want to know is [U]if [/U] I can trade either the DJX or DIA in the short term, and [U]how [/U]to go about that. I downloaded the thinkorswim platform for some papertrading, but the expiration dates confused me."

Dark Horse said: "One more thing. If trading options daily or weekly is somewhat complex to understand, wouldn't that undermine liquidity?"

roarflolo said: "You've been given links to places where you can learn about options so we don't have to type it for you here. :roll: An Option is a contract to buy 100 (usually) shares of the underlying. The contract has an expiration date. For instance, the GOOG JUN07 500 CALL is a contract to buy GOOG at 500, the contract expires the third friday of June 2007. If you buy this contract you have the right to buy GOOG at 500 between now and June 15th. If you sell this contract you are obliged to sell GOOG at 500 between now and June 15th if the other party to the contract (the guy who bought it), exercises it. Lots of option contracts are very liquid; OEX, NDX, DIA, GOOG, AAPL, etc. Some option contracts are traded on only one exchange and the bid/ask spread can be very wide (but liquidity is not a problem), this is something to look out for. You can day-trade options if you like; just watch the spreads. Read up on options pricing; the main factors are underlying price, strike price, implied volatility and time to expiration. Lots of other details to all of this as well: [url]www.############.com[/url], [url]www.cboe.com[/url]"

roarflolo said: "What happened to my link? :angry: It's for ############ dot com ... not spam ... I promise :th_dblthumb2: i n v e s t o p e d i a"

drdan said: "[QUOTE=Dark Horse]I'm fully aware that I don't understand options sufficiently to trade them, which is why I'm asking the 'dumb' questions. ;) All I really want to know is [U]if [/U] I can trade either the DJX or DIA in the short term, and [U]how [/U]to go about that. I downloaded the thinkorswim platform for some papertrading, but the expiration dates confused me.[/QUOTE] It is not that your question is dumb but rather it is extensive. You do not even have the basic concept of options so we would be talking greek to you, literally. Options are contracts that can be bought and sold. Just like paper notes on mortgages or even contracts on real estate, instead of having a contract on a piece of real estate you have a contract that is worth 100 shares (usually, sometimes more) of a company stock, future, or index. So like most good contracts they expire. Your question about how to trade options requires almost 200 plus pages to explain, or if you just want me to answer your question quickly in my terms I'll give it a shot. 1.) Open a brokerage account that specializes in options if you don't you'll be sorry. Think or Swim, I believe you have tried, is great. 2.)Next do you think the DJX is going to be bearish or bullish in the next couple of weeks - lets go bullish, because we are currently climbing a wall of worry and the trend is still bullish. 3.)You need to buy a call if you think the DJX is going to be bullish or maybe the volatility is a little high so you may want to write a put, but since you do not have options experience the broker is not going to allow you to sell naked puts, so lets stick with buying a call. 4.) Now you need to pick an index that follows the DJX that trades options - lets try DIA or Diamonds as it is referred. 5.) Next you need to pick a strike price and an expiration month. The more out of the money a strike price is the cheaper it is but the since there is no intrinsic value and only extrinisic value it can be a greater capital risk. The current months or anything with an expiration of less than 30 days is going to have a much faster time value depreciation, but you need to weigh the odds of a drop or hopefully a rise in volatility to offset the time depreciation - otherwise since you are new to this I would choose an in the money strike price with an expiration month that is at least one away from the current month especially since you will be in the trade for two weeks. 6.) Go to your broker and place the trade. 7.) If the DJX goes up most likely the DIA will go up and as long as volatility does not drop you can close your trade two weeks later for a profit, just sell the contract back. But if you are wrong or even if you are right, but volatility drops you lose, but if you bought an in the money call like I suggest with an expiration month at least one month greater than the current month you may not lose as much and live again to play another day. So you see options can be bought and sold at anytime just like stocks; however if you did not understand a flipping word I wrote in #5 do just like we have stated and go to the 200+ pages website of the CBOE and start reading. Trust me we are very helpful here and if you have a basic question we will answer it. However like I said when your question makes it obvious that you do not understand even the basic concepts of options we are not going to throw you to the wolves by answering your question with an easy yes or no. You need to go read at the CBOE, they have plenty of tutorials that can explain it much better than what we can."

drdan said: "[QUOTE=Dark Horse]One more thing. If trading options daily or weekly is somewhat complex to understand, wouldn't that undermine liquidity?[/QUOTE] Nope because people do understand them and the big boys use them for hedging on a regular basis. There is a market maker that has to trade if you place a market order, the only difference is that you may not like the market order the maker gives you on a low volume option. If you stay with the indices like you are thinking you will have no problem getting in and out of trades."

drdan said: "[QUOTE=roarflolo]What happened to my link? :angry: It's for ############ dot com ... not spam ... I promise :th_dblthumb2: i n v e s t o p e d i a[/QUOTE] Darren doesn't like invest*o*pedia for some reason."

Dark Horse said: "Thanks so much guys (or gals). Very helpful info. Will be back with more questions, but I understand I first have some studying to do. Later,"

dannyboy990 said: "If you want to be an option trader guru, go pick up the under-rated book by cox and rubinstein called "option markets". Very nice read! Also don't forget Natenberg's book "Option, Volatility and pricing" After that, you can go visit this site [URL="http://www.israelispeculator.com"]http://www.israelispeculator.com[/URL]"