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Options are a great trading vehicle but many people stay away from them because of their perception. Most believe options are hard to learn and only for a financial expert. This couldn’t be farther from the truth. Options, like any skill, do take time to learn but after understanding the basics you will have a solid foundation to build on. How long does it take to learn them? When can I start to make money? These are valid questions but it depends on how much time you’re willing to put into the education. It took us years to learn because we didn’t have the proper guidance when starting. So where do you start? Here is the first step.
Understanding you can learn options like an expert is important, making options easy is critical to your success. The way to make options easy is to start slow.
- Understand the basics – What is an option? Right and Obligation
- Be comfortable with a Put and a Call. How to buy and sell them. Premium or Debit
- What is Delta
- How to calculate the break-even of a call or put with a premium of $X
The great news, once you have the basics down, every other option strategy is built off of it. So learning the basics are truly important.
Once you have a command of the basics, you are ready to learn a strategy, we suggest you learn one strategy. Understand and own that strategy and trade it until you are profitable. One of the easiest, other than a directional Put or Call, would be a Vertical Credit Spread. Vertical Credit Spreads have extremely high probabilities and since most options expire worthless, this spread works in your favor. Most new traders to options dive into the more difficult strategies because they see the large amounts of money they could possibly make. But they fail to realize that they could lose that money as well. Vertical Credit Spreads will not make you rich overnight, but they are consistent, provides a great income and are simple once you learn the basics of options.
Keep it simple, start slow and you be on your way to becoming a successful options trader.