How to Trade Options

Trading, buying and selling options isn’t difficult once you understand the basics of option investing and how to invest in the option market. How to trade options is then relatively simple.

Open a option trading account with an experienced brokerage. Some brokerages will let you open an account for as little as a $1,000, but it will vary from broker to broker. On an average, $5,000 is the average to open a option trading account, but the broker will probably limit your account to basic option trades rather than the more advanced strategies like naked put selling, which carry more risk.

You need to decide which type of strategy you want to utilize and which type of option contracts you would like to speculate in. For more information, read about the difference between calls and puts.

Set up your price charts to track the underlying stock on at least one of your price charts while having a separate screen for the stock symbols. Also, have a separate screen for option quotes on the stock you are tracking. Some trading platforms will let you link all the screens together so that as you click through the different stock symbols it will automatically pull up the price chart as well as the option quotes.

Write out a sound trading plan that details your trading approach and a sound money management method. A solid trading plan will detail the type of trades you will take, the type of trades you will not take, trade management, and risk control.

Happy Investing!