Understanding Options Trading

When you wish to take up options trading, you must first start with the fundamentals. Understanding the basic components of options and how they work is your first task.

Confused business man seeks a solution to the labyrinthA good place to start is by answering the questions,

What is an option?

What are strikes?

What are contracts and what are contract sizes?

Those are the basic components for learning your pricing and where to start with your training. You also need to understand the standard option quote and how to analyze it and what the different components mean.

Calls and Puts, of course, are the way options are described. You need to know the difference between the two, and what your obligations are if you are selling and what your benefits are if you are buying. The reason that you may want to buy or sell a put or call can only be determined, if you understand what your obligations and benefits would be.

Following that, you need to understand basic terminology, such as, being a “long” or “short” or “in the money” or “out of the money”. You will use those terms every day. Also, you will need to know such terms as “intrinsic value” or “extrinsic” or “time value.” You should understand options exercise and assignment, and the difference between index and equity options.

When you have a good grasp of these concepts, you are ready to begin practicing some option trading and learning some strategies. At Sheridan mentoring, we offer courses that take you from the basics, all the way up to running options as a business. We can help no matter what your starting options trading knowledge is. Please contact us for all of your options trading education needs. Our beginner course called, Option Foundations Class is a great starting point. Click HERE to learn more about the class, and begin your journey as a successful options trader.

-Mark Fenton

Send in any questions to info@SheridanMentoring.com