A reader named Bill asked the following question about options trading by way of leaving a comment the other day:
I love your posts. I read every day.
I am studying options. I am curious about your opinion of options and the advantage they provide to the trader.
Firstly, I love options. Personally, I rarely trade individual stocks anymore. I prefer to trade the options instead. They offer a much greater opportunity to manage risk, and I’m not just talking about at the outset, but also throughout the course of a trade. They also allow you to put less of your capital to work in a position, which could give you the ability to better spread out your trades, if that’s something you wish to do.
Secondly, options need not be complicated. You will hear a lot of people say that they are, and they certainly can be, but they do not have to be. Very simple directional trades can be made through them if you have a solid understanding of the basics. You don’t need to understand all the Greeks and whatnot to trade profitably using options. Yes, there are ways of trading options which require a deep understanding of some pretty intense concepts, but that isn’t a universal thing.
I have done some course type work on simple options trading before. Might be time to dust that off an put the material out there again.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
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