October 12, 2008
I want to trade and get my feet wet on put’s and calls’. Is there any advice on how to start and which stocks?
youroutsider asked:
New to this area. Any help is great.!
New to this area. Any help is great.!
Filed under Investing by Administrator
Comments on I want to trade and get my feet wet on put’s and calls’. Is there any advice on how to start and which stocks? »
Educate yourself throughly on the topic before investing a dime.
Right this instant as you read this do you know what puts and calls even are? That is not meant to be sinide just to prove you need to study the topic.
If your going to trade use this approach….
If your simply buying puts or calls….
find a stock that you think will move, and buy at the money puts/calls in the direction of the move.
MAKE SURE ALL YOUR RISK:REWARD RATIOS ARE AT LEAST 3:1….so if an option costs $100, make sure you think the stock will move far enough making the option worth AT LEAST $300 at expiration (or at some point when you’ll close out the trade).
With a strategy like this, you only have to be correct less than 50% of the time to make money over the long term.
The key to making money in the market is letting your winners run and cutting your losers ASAP. If trading options you can accomplish this by simply making sure all your winning trades are making 3times the losers.