http://www.traderinterviews.com/idealab/idea/view/derivatives The latest comments on derivatives Fri, 25 Jul 2008 04:00:09 -0700 en-us Copyright TNC New Media Inc., 2006 - 2008 http://www.traderinterviews.com/images/traderinterviews_144x19.gif http://www.traderinterviews.com/idealab 144 16 http://www.traderinterviews.com/idealab/entry/view/derivatives#c112
First, with proper money management derivatives offer traders the ability to limit risk by hedging your bets. With options you can purchase one contract which allows you to control 100 shares of stock, more leverage for smaller capital requirements = larger ROI. When buying options time decay is your worst enemy. A stock can go in the direction you planned, but if it does not do it in a sufficient amount of time you could still end up losing money. When selling options, time decay is your friend, but watch out for implied volatility.

Read OPTION VOLATILITY AND PRICING for starters.
Also, I like THE OPTION PLAYBOOK as a reference guide.
And visit http://www.optionseducation.org/classes/ for free options class basics.

Make sure your trading platform is option user friendly (I use thinkorswim-rated #1 options platform and trading platform by Barons for like 3 years, it’s amazing) and start small, simple and on a paper account first testing your strategies. And remember, if you start testing a strategy and think its “Just Too Easy,” if it were that easy everyone would do it so always expect the unexpected.]]> http://www.traderinterviews.com/idealab/entry/view/derivatives#c112 Fri, 25 Jul 2008 04:00:09 -0700