Mistakes to Avoid in Options Trading (Chapter 1)

سيجهز رابطك خلال 15 ثانية.

انتهى! تم فك تشفير الرابط.

 Mistakes to Avoid in Options Trading   

 Trading is not an easy thing. Most of you do not know that. You just start the business with no plans, tips, and strategies. How do you even expect to survive? Entering into the options trading game with so much excitement, forgetting the crucial things you need to do will lead you nowhere. Mistakes eventually arise, and you become stranded on what to do. You will be informed of some of the mistakes traders commit and the ways you can shun from those mistakes.    

Common Options Trading Mistakes   

There are several common mistakes that traders commit while trading options. Below is a detailed list you can go through it.   Lacking a trading plan. Most traders enter into the options trading game without a plan. You have got a high potential for loss. Failure to organize you into trading is preparing to fail. Without guidelines, you cannot make it in trading. All your goals of making money will be destroyed. When you buy or sell that option, you will be incurring a lot of losses. Lacking an exit strategy. When your plans fail to work out, what do you do? Do you just implement rushing decisions on your trading? An escape plan comes in handy here. Having an exit plan is very crucial in all trading. You can control your profits and losses. Most traders fail to have a detailed escape plan, which makes them fail tremendously. You lose all your money and fail in trading. Having ignorance at the time of expiry. 

Options have a date of expiration. It is an important factor when purchasing calls and buying put options. Most traders fail to recognize this factor and end up messing up the last minute. Options lose their value when you are closer to the time of expiration. Buying options with the mentality that they are cheap. Cheap is expensive. 

Cheap options have lower premiums compared to the expensive ones. You will earn little or no cash with cheap options with many losses. Options that are out of the money are not friendly at all, especially for beginners in options trading. Selecting the wrong trade. Working on a trade that you cannot handle can land you into big trouble. There is a high potential for bigger risks. Work on the trade you can manage to succeed. Putting effort into complex stuff than your ability is a total failure. Many traders who get themselves on the wrong trade lose a lot of their money and precious time. Depending on guesswork. Too much guesswork in options trading is a risky game. 

Guesswork like the rise and fall in the stock’s price is not an advisable strategy. You should take advantage of the tools of research, analysis, and education materials. Tools for analysis help in analyzing outcomes in a detailed manner as compared to guesswork. Education materials will empower your knowledge a lot in trading, and you will be aware of the basic concepts. The research tool will assist in the formulation of strategies to be used in trading. The use of guesswork will surprise you a lot with the trading failures. Ignoring protective stop loss. Failing to have a stop loss is a really bad idea. 

You can fail tremendously in trading. Most traders, who prefer to cheap options, wait to go out of the market when the option becomes fruitful, or it declines when it reaches the time of expiration. Being over-optimistic. Optimism is always acceptable though being over-optimistic is another bad idea. Options trading are all about performing some mathematical calculations and coming up with the right figures for your returns and losses. Putting a positive mind always is not healthy in trading since many risks are involved here. You need to be prepared for the losses that might occur and be ready enough to handle them. Using only one strategy. 

There exists some information about the many strategies you can implement in options trading. You need to go through the many strategies before deciding you will settle on which strategy. You not advised to rely on only one strategy. Having different strategies will help a lot. In case one trading strategy fails yet you are in a critical situation, you can implement another successful strategy as quickly as possible. Your trading will experience no delay. You should consider mostly the simple and crucial strategies that are needed to be implemented in all options trading. 

An example of the strategies is the covered call strategy.  Trading with a bigger bite. What’s all with the rush? A successful money-making procedure requires smaller and sure moves other than big and weak moves. Take your time in trading and go at the right speed. Do not be so greedy for the money that you make complex decisions ending up losing everything. Good things take time. You need to accept that fact. When you utilize much of your cash, there are higher chances of bigger losses other than just spending a little money.  

Lacking persistence and consistency. Trading is not like any other business that makes a huge amount of money just in the few days after entering the business. First and foremost, trading is tough and risky. You need to persist with all the risks and also be consistent. Most traders give up when there are occurrences of risks in trading. Keep pushing hard and of course, everything will work out fine. Failing to accept uncertainties. All markets have imperfections.

Options Trading Simulator (Chaptre 2)

سيجهز رابطك خلال 15 ثانية.

انتهى! تم فك تشفير الرابط.

 Options Trading Simulator 

The simulator will also indicate the stocks with the biggest gains on that particular day and those with the biggest losses. This is important information that can help and guide traders on how to place their trades.  If you check out your portfolio page, it should now indicate 100 shares of WMT as well as some cash balance. 

Here is what the various items on the portfolio page mean.  

Buying power: 

This refers to your capacity to buy options or shares and to trade. The buying power is typically based on your portfolio’s value as well as cash amount. It is not possible to make trades that do exceed your indicated buying power.  

Account value: 

This value means the total value of the portfolio as of that particular moment. This value is updated each night once the markets close. The currency of the account is also indicated in brackets.  

Annual return: 

This term on your purchase page refers to the total returns, as a percentage, if all your annual returns were to be extrapolated for a given year.  

Cash: 

Here, the amount of cash that you have in your account at the given moment will be displayed. The buying power display is considered a better indicator of financial position.  

You will note that the account on the simulator is divided into 3 distinct parts. These are the option portfolio, the stock portfolio, and the shorted stock portfolio. 

The stock portfolio will indicate all the stocks that you currently have. It will indicate all the different values such as company name, the number of shares and so on.  It is important to learn how to interpret the Portfolio Summary page, it is important to now apply all these tools and ensure that you conduct trades as required. Let us now learn something else on the simulator.  

Use of ticker symbol on the simulator  

Even as you purchase stocks and options on the simulator, you may have noticed the system requesting a company’s stock symbol in order to place a trade. Each company that joins the markets receives a unique stock symbol. Once the symbol is awarded, it will be unique to the company and none other can use this symbol.  The ticker symbol is sometimes chosen by the company itself or the bourse. It can be as brief as one single letter or as long as 5 letters. For instance, Ford Motor Company uses the letter F as its symbol  

Ticker symbols

In many instances, news reports often quote companies using their initials which may confuse others to think of the initials as the ticker symbol. For instance, many newspapers across America often refer to the company Hewlett Packard as HP yet the company is quoted on the bourse as HPQ. This shows the need and importance of confirming a company’s denotation or ticker symbol before entering any trades.  Any time you wish to purchase shares, stocks or options and all other financial instruments quoted at the markets, make sure to check the ticker symbol. Do not make a guess or an assumption otherwise you may purchase the wrong stock. Fortunately, most brokerage firms allow you to look up ticker symbols with their accounts. The trade simulator provides the same tool to search for a company’s ticker symbol.  

How to research ticker symbols on the simulator  

Now, try and search for the ticker symbols of companies such as Pier 1 Imports and Nike. First, you click on the symbol lookup tab. This tab is found when you click on the Stock Research tab. You will receive a prompt so proceed and enter the search term, Nike and click search or enter. You will be shown the symbol NKE and a confirmation of the company whose ticker this is.  Similarly, when you follow the same procedure to find the ticker symbol of Pier 1 Imports, then you will receive the ticker symbol PIR and a confirmation of the company’s details. This shows how fast and easy it is to find a company’s ticker symbol.  

Diversify your portfolio with the simulator  

As an investor and trader, you should always diversify your portfolio. If you do not and instead put all your funds in a single product, then you risk losing all your funds should things not work out with the trade. Simply put, you should always diversify your trades.  The best way to succeed is to purchase and build a diversified equity portfolio. 

However, you need to be smart when you diversify. For instance, if you choose to invest in McDonald’s Corporation, you should avoid investing in another fast food chain.  The reason is that, if the fast food industry were affected, your investments as a whole would take a hit. You should, therefore, buy some McDonald's shares and then diversify into a different field, say energy sector. You can consider buying shares in ExxonMobil, for instance.  When making real life decisions, you need to take a more scientific approach. This means using a system that ensures you diversify your portfolio in the right manner.  

The GICS or Global Industry Classification Standards is widely used by traders, investors and fund managers among many others to diversify their portfolios. This system splits the economy into 9 different sectors. These 9 sectors are listed below.  

1. Energy    
2. Financials    
3. Materials   
4. Industrials   
5.  Utilities   
6. Information Technology 
7. Telecoms    
8. Consumer    
9. Health Care   

Let us assume you already own WMT, PIR and TLAB shares. This means you own shares of Walmart, Pier 1 Imports, and Tellabs. You, therefore, want to avoid buying shares or stocks in the Telecom or consumer discretionary sectors. However, you can still purchase stock from 8 sectors. With the simulator, you can use a stock screener to get a list of available stocks within a particular sector.  

Simply get onto the simulator and run a stock screen for your preferred sector. Now proceed to check out which stocks meet your analysis requirements and also interest you. There is a lot more to portfolio diversification and all these cannot be summarized here. Traders and investors often consider many other factors when diversifying their investments.

Options Trading Simulator (Chaptre 1)

سيجهز رابطك خلال 15 ثانية.

انتهى! تم فك تشفير الرابط.

Options Trading Simulator   

There is a close link between stock trading and options trading. However, options are not the same as stocks. Options are largely used to generate a profit using much smaller investments compared to stock investments. Another use of options is to insure against losses.  There are quite a number of reputable simulators online and one of the most reliable and trusted one is the simulator from Investopedia. This firm is not only the leading financial information and services firm but has an amazing wealth of resources online. The simulator uses actual data from stock markets so as to produce real life experience of using a real brokerage account.  

Introduction to the trade simulator  

The trade simulator is used for a number of reasons by different people. For instance, instructors use it as an instrument to teach their students all about the stock and options markets and how to use it. Some people use this simulator to try out new trading strategies while others just use it to find out what the real trading account feels like. Basically, the main purpose of the simulator is to make you simply, or any other user, a better trader.  There are a couple of tabs located on the top side of the user interface. When you click any of these tabs, then more links will appear and these will offer you more choices. Here is a look at the 7 separate tabs found on the online trading simulator.  

Tabs on the trading simulator  

• Home: The home button takes you to the home page and gives you an overall outlook of your trading account. Here, you are able to access other tabs and get to the pages you desire. At the home page, you also get an opportunity to change your settings and profile.  
• Portfolio tab: This particular tab provides users with a summary of the stocks, shares, options and all other holdings.  
• Watch list tab: This particular tab enables you to easily and efficiently track any stocks you want but without allocating any cash to any part of the portfolio. It is easy to add new stocks and manage the current ones from here.  
• Stock research: The stock research tab comes with important tools that enable users to carry out research on the performance of stocks and of companies that they may be interested in. Some of the tools available include a ticker lookup tool, a research tool and so much more.  
• The trading tab: This tab contains the simulator where users get to enter or input their trade orders. They are also able to review all open, failed and outstanding trades.  
• Ranking tab: Another tab you will notice on the options trading tab is the ranking tab. This is an important tab that instantly lets you know of your current placing enabling you to opt for any specific competition.  
• Messages tab: This is a tab that allows users to check your messages that are in your inbox. There will sometimes be messages sent to you and users will also be able to send messages to others.  
• Games tab: There is a games tab on the trade simulator that allows any user to manage, review and create games. You will find active games which you can join and participate in. users are by default invited to join in some games and the choice to join in or not is voluntarily made.  
• Awards: Any user who successfully completes different trade simulator activities, especially trade activities gets to receive an award.  
• Help: It is always good to know that help is at hand whenever needed. As a trader and investor, if you ever need help with tutorials or have any general questions, then you simply need to click this tab.  

Using the simulator to place orders and buy stock options  

You are now familiar with the tabs on the trade simulator and can use these buttons at any stage of trade. The next step now is to set up and submit a trade using this simulator. We will now endeavor to purchase 100 shares of Walmart Stores Inc., abbreviated as WMT.  

First, choose the trade tab and then enter WMT and 100. Figure 100 is entered in the quantity field while WMT is entered in the symbol field. The transaction needed is “Buy” while the price selected is market. The simulator will require a duration period and here you choose “Good Till Canceled”.  

Now select the Preview Order so as to view the order confirmation. The Preview Order will show the stock purchased, the type of trade, price and many other essential details that you need to trade successfully.  

Please take a minute and confirm each and every detail on this preview. Ensure that all the details match what your trade details are. This is indeed a confirmation process, that you are buying 100 shares of Walmart Stores, abbreviated WMT at market rates. For a real trade online, you would be charged a commission fee of about $20. Brokerage firms will charge you a commission for executing the trades on your behalf.  

As soon as you confirm all the details on the Preview Page are, you may then proceed to submit the page. This will confirm your purchase of 100 shares of WMT at current market price. The order will now be filled when the next available opportunity presents itself. Should an order be placed outside of regular working hours, then the order will be executed first thing on the next trading day. Your order can be confirmed by checking out the order submission page. The stock simulator will confirm this for you.