Options Trader http://www.options-trading-education.com/23974/options-trader/ So, you want to make money trading options. Then you need to develop the knowledge base and skill sets of an options trader. If you are already a stock trader you should realize that there a difference between stock and options trading. However, each type of trading requires fundamental and technical analysis of stocks and stock prices. And each typically requires a trade station and trading software. From the same starting point a stock trader analyzes and then buys, holds and sells stocks. An options trader enters into a contract to buy or sell stocks if certain conditions should arise. Buying and Selling Options Contracts The difference between buying and selling options contracts is crucial for options traders. Buying Options Buyers of stock options pay a premium for the right to buy or sell a stock within the period of the contract. The contract price is called the strike price and is set for the duration. Thus an options trader looks for a stock that he thinks will go up in price and buys a call contract. This gives him the right to buy if he wishes but confers no obligation to do so. If he believes that a stock will go down in price he will purchase a put contract. This gives him the right to sell the stock if he chooses. In each case the trader may simply exit the contract by making the opposite trade and pocket his profits or absorb his losses. With both puts and calls an options trader limits his risk to the amount paid for the premium. Because he does not need to pay the full price of the stock he can often enter a trade for little money and earn a multiple of his investment.

1. Options Trader

2. http://www.options-trading-
education.com/23974/options-trader/
So, you want to make money trading
options.

3. http://www.options-trading-
education.com/23974/options-trader/
Then you need to develop the knowledge
base and skill sets of an options trader.

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5. http://www.options-trading-
education.com/23974/options-trader/
If you are already a stock trader you should
realize that there a difference between
stock and options trading.

6. http://www.options-trading-
education.com/23974/options-trader/
However, each type of trading requires
fundamental and technical analysis of
stocks and stock prices.

7. http://www.options-trading-
education.com/23974/options-trader/
And each typically requires a trade station
and trading software.

8. http://www.options-trading-
education.com/23974/options-trader/
From the same starting point a stock trader
analyzes and then buys, holds and sells
stocks.

9. http://www.options-trading-
education.com/23974/options-trader/
An options trader enters into a contract to
buy or sell stocks if certain conditions
should arise.

10. http://www.options-trading-
education.com/23974/options-trader/
Buying and Selling Options Contracts

11. http://www.options-trading-
education.com/23974/options-trader/
The difference between buying and selling
options contracts is crucial for options
traders.

12. http://www.options-trading-
education.com/23974/options-trader/
Buying Options

13. http://www.options-trading-
education.com/23974/options-trader/
Buyers of stock options pay a premium for
the right to buy or sell a stock within the
period of the contract.

14. http://www.options-trading-
education.com/23974/options-trader/
The contract price is called the strike price
and is set for the duration.

15. http://www.options-trading-
education.com/23974/options-trader/
Thus an options trader looks for a stock that
he thinks will go up in price and buys a call
contract.

16. http://www.options-trading-
education.com/23974/options-trader/
This gives him the right to buy if he wishes
but confers no obligation to do so.

17. http://www.options-trading-
education.com/23974/options-trader/
If he believes that a stock will go down in
price he will purchase a put contract.

18. http://www.options-trading-
education.com/23974/options-trader/
This gives him the right to sell the stock if he
chooses.

19. http://www.options-trading-
education.com/23974/options-trader/
In each case the trader may simply exit the
contract by making the opposite trade and
pocket his profits or absorb his losses.

20. http://www.options-trading-
education.com/23974/options-trader/
With both puts and calls an options trader
limits his risk to the amount paid for the
premium.

21. http://www.options-trading-
education.com/23974/options-trader/
Because he does not need to pay the full
price of the stock he can often enter a
trade for little money and earn a multiple of
his investment.

22. http://www.options-trading-
education.com/23974/options-trader/
Selling Options

23. http://www.options-trading-
education.com/23974/options-trader/
Selling options is typically more profitable
than buying over the long run.

24. http://www.options-trading-
education.com/23974/options-trader/
However, the risk of an occasional big loss
often limits the selling or writing of options
to trading houses and traders with deep
pockets.

25. http://www.options-trading-
education.com/23974/options-trader/
In selling calls or puts the options trader sets
a price based on his expectation of
whether a stock price will go up or down
and just how much.

26. http://www.options-trading-
education.com/23974/options-trader/
He sets this price in such a way that he is
typically guaranteed a profit.

27. http://www.options-trading-
education.com/23974/options-trader/
He collects a premium for absorbing the risk
that the stock in question will not perform
as expected.

28. http://www.options-trading-
education.com/23974/options-trader/
When an options trader sells a call contract
he agrees to sell a stock at the strike price
no matter how high that stock might go.

29. http://www.options-trading-
education.com/23974/options-trader/
He agrees to buy a stock at the strike price
not matter how far that stock might fall.

30. http://www.options-trading-
education.com/23974/options-trader/
Selling a covered call option only entails the
risk of losing out on a run up in stock price
because you already own the stock.

31. http://www.options-trading-
education.com/23974/options-trader/
Selling an uncovered call option opens the
options trader to significant risk if the stock
price goes up a lot.

32. http://www.options-trading-
education.com/23974/options-trader/
This is because he will need to purchase the
stock at the higher price and sell at the
lower and absorb the consequent loss.