Welcome to From Zero To Options, the fastest-growing community for active traders of stocks and options.
Did you know that option trading is the most powerful tool on earth to build wealth and manage risks?
This is absolutely true, but unfortunately is not true for everyone…
Because not everyone is willing to develop the skills and build up the knowledge to be able to manage this amazing tool correctly.
If people only knew that making a little bit of effort today they could achieve everything they dream of, maybe most of them will change their mind. But here the truth is that most people do not want to wait and just believe that success and riches can be achieved overnight and without any knowledge and hard work. Nothing is further from reality!
Let’s go through it now… What is this website all about?
From Zero To Options is all about stocks and options trading. We do this for a living and we really love the power that this tool provides to the average person. In the top menu we provide posts, full articles and trading tutorials all absolutely for free!
Our purpose here is to build a community of people passionate about stock options so to share ideas, techniques, strategies and answer any doubts related to stocks and options. Feel free to join our community on FaceBook Here!
Option trading is art and science at the same time, because although is mathematically related it needs creativity and lots of self control on your part.
You must be able to manage feelings and take responsibility of your decisions. And actually this is the hardest part for most.
You must be able to control fear and greed… those are your worst enemies when trading.. we like to say that you must reach the next level to dominate those emotions and have them always under control.
I have always been told that option trading is very risky. Isn’t that true?
People keep asking me the question above and I personally love this one. Why? Because it looks so naïve to me. How can you think that something is dangerous or risky if you haven’t tried it yet?
The problem here is that most people just do not try new things. They are worried about starting out new ventures and accept what people tell them without ever giving it a try. So the main problem here is the courage to change our life and the negative beliefs of people around us.
“Do just once what others say you can’t do, and you will never pay attention to their limitations again.” James R. Cook
When people hear that you’re trading stock options, a large majority of them will tell you option trading is risky and you should keep it far from you.
I say… do not believe in everything you hear or overhear… but try it yourself and make it work for you! Take responsibility of yourself and decide now to learn new skills for your future. Take control of your life now!
My friends and family discouraged me from trading stock options in the first place. I am glad I didn’t listen. In fact, when I started being successful their approach changed dramatically. Now they want to know my secret!
I think it’s amazing what you can achieve when you stop listening to other people’s negative beliefs.
Ok, fine… I may decide to take responsibility over my life, but isn’t option trading too much risky for the average person?
Straight… It may be if you are not in control of yourself and if you do not decide to build up the knowledge it requires. This is a business and not gambling, people usually are misled by this.
You can learn the skills and start trading as a professional if you put in determination and a little bit of hard work. As any business it takes time, but the rewards can be unbelievable!.. and then you will love the journey, because you’ll discover something new every day.
Going back to your question.. option trading isn’t risky at all if you learn how to manage the risk. Traders are mainly risk managers and their goal is to handle the financial risks involved in trading stocks, options or whatever they trade..
Keep it in your mind… There is always a risk involved with any kind of investment out there, even if you purchase treasury bonds.
Actually, as strange as it may sound…
…options were born in the first place as a tool to HEDGE the risk. Yes.. you read well.. just a way to hedge the risk associated with stock trading!
In fact, you may decide to use put or call options just to protect yourself in case the stock you own moved dramatically in one side.
How options can be used for everyday trading activity?
Many traders and investors use this tool daily to protect their investments. Options can be great when it comes to hedge the stocks you hold against a market crash!
Others instead use options to lock in a profit on a monthly basis like an income. Imagine learning the skills to earn a 15%, 20% out of your capital and get the cash you need for your everyday life by actually working only an hour a day.
More aggressive traders use the leverage provided by options to make aggressive positions and earn 100% or more out of their investment.
Moreover, options allow you to get a profit either when the market rises or collapse.
All this is possible with option trading, because they are a very versatile instrument. Having learned the basics, you can decide to use options in the way that best fit your personality and trading style.
At this point I must warn you that options have always a balance between rewards and risk, so that more aggressive positions involve a riskier approach.
When trading options you must find the risk/reward ratio that makes you comfortable with and decide to invest only money you can afford to lose. This is my approach! Following this approach is my way to control my emotions and keep everything under control if the market should start moving against me.
Please, do not forget to join our community on FaceBook Here! so to share with us your experience.
So.. Why should I learn options?
You should simply learn how to trade options because you want to have your life under control and decide for yourself. No more issues related to the overall economy, no more problems coming from your company or government.
With this tool you can have huge profits when the market crashes and the masses lose their jobs. You are not going to rely on anybody other than yourself any more.
To make all this happen, you should decide to make a start today and learn something that can change your life tomorrow.
But I do not have enough money to invest, how can I do it?
Good question! The great thing about option trading is that you need just a little money to open a real account. For example ThinkorSwim by TD Ameritrade, the brokerage firm I personally use and recommend, requires only $2500 to have your account up and running.
Moreover, options are very different from stocks because they require much less money to invest in high leveraged positions. In fact, options are so versatile that allow you to even use as little as $100 to enter a trade.
And then you needn’t open a real account in the beginning. You can just start paper trading in a simulation mode and test your ability day by day. This feature is absolutely free on ThinkorSwim.
Can options trading turn me in a millionaire overnight?
Options trading is a lifestyle and a tool, but you should not be pursued into using it because you want to make money fast!
Many website out there promise to make you a lot of money with option trading in a short amount of time. I do not feel that way, but I did find out myself that making 30-50 or even 100% return on your capital can be possible and not uncommon.
Trading stock options can be fun and it can also be risky. If you trade the right way the rewards are great, but if you don’t you’ll lose money. Trust me, I have tried it myself and it was painful!
Once you learn the power of stock options, investing will never be the same again. The versatility and profit potential of stock option investing is nearly unmatched in the stock market arena.
Can be possible earning money either when the market rises or collapses with option trading?
I want to show you briefly the power of option trading. The answer to this question is the main point of my Exclusive Report that you can download absolutely for FREE here.
My report provides you with the basics of options trading, plus it offers a BONUS SECTION for experienced traders to make a difference in high volatile markets!
EXAMPLE – REAL TRADE
On the 6 July 2011 I did a trade on Cisco System Incorporation (Symbol CSCO). I believed in a strong move of this security, but I was not sure of the direction of the trade.
I explain in detail in my free report the analysis to carry out in this kind of trade. What is important here is the potential of the position and its risk profile.
I invested $800 (as you can see you do not need thousands of dollars to start trading) to create a so called delta neutral position with unlimited potential profit.
Yes.. you read well.. My max risk was capped, while my max reward was unlimited on this kind of option strategy.
My position is described in the table below. Do not worry if it doesn’t look clear, I am going to explain it in depth on my free report.
Graphically, my trade produced a risk profile as below. On the left hand side there is the CSCO chart, while on the right hand side is showed the risk associated with my trade.
As you should notice, the stock is being traded exactly in the middle of the position (blue line in the middle of the chart). As a result, if the stock moves upwards we make a profit, if the stock moves downwards we still make a profit. The only risk is if the stock doesn’t move at all. In such a case, you do not risk all the money invested, but just a small amount of it (around 10%) due to a couple of variables that we will check out on my exclusive free report. By the way, we still have two odds out of three in our favor!
At the end of the trade I collected $475 or 60% profit out of my investment capital in only 30 days (as unbelievable as this can sound this is approximately a 700% profit on a year basis!). You can check it on the table and chart below. Actually my position was still open, because I got an additional profit from the subsequent strong movement of the underlying. But I explain this in more detail in my free report. You can download it here now!
Table 2 – Analytical Risk Profile the day before the earnings release (Source: Optionetics)
Chart 2 – Stock Chart and Straddle Risk Profile a day before earnings (Source: Optionetics)
What is great about this is position is that you need to take just a few minutes a day to manage it and make the necessary adjustments. What’s more you can decide to invest more serious money and in that case your 60% can become much larger!
I must warn you that making this kind of investment can be very profitable only if you take the time to learn the skills and understand how to manage it. Not all options positions are profitable, but with the right knowledge you can easily minimize the loss to such an extent that it doesn’t hurt your portfolio too much!
All questions above are the ones I used to ask myself when I was just a beginner a few years ago. I have noticed how newcomers keep asking the same questions over and over again. For that I decided to answer all of them in one place.
If you are interested in getting more information or if above I missed something you need to know, please feel free to leave below a question, new ideas or just a comment to let me know what you think about this page.