21st Century Academy

Options trading has become a popular investment strategy during the last 30 years. Buying and selling stock options is a little more complicated than buying and selling actual stock; thus, the practice has gotten a reputation as a particularly risky one. The truth is, options trading can be risky if you’re not familiar with the way the stock market works, and with the particular stock that you are trading. If you become a good judge of which stock is likely to go up in price and which isn’t, however, options trading becomes extremely lucrative, ans The 21st Century Academy are a great example of an Options Trading educator.

How Does Options Trading Work?

There are many different ways to trade stock options. Some of them require you to check on the prices of stock many times a day. That’s how professional traders make their living, and it is a thrilling and profitable practice–if it weren’t profitable, there wouldn’t be professional traders.

All options trading involve giving buyers the “option” to buy stock from you at a certain point in the future. Thus, if you own 500 shares of stock in Company X, you can “sell” someone the option to buy those 500 shares from you at some future point, at a set price. This initial fee that you get is known as the premium. It is determined by how much the shares themselves are worth. It consists of some percentage of the total cost of the shares (the higher the percentage, the more favourable the trade).

Succeeding at trades of this kind is all about being able to predict how much the value of a given stock will go up. If the 500 shares of Company X stock don’t increase by the amount of money you’d set out, in the amount of time you’d set out–then you get to keep the shares and the premium. Options trading a little bit like some gambling games (far from all), where people who don’t know how to play think it’s luck, but actually it’s about confidence and skill.

Interested in learning more about options trading and wealth creation? Check out the free book from Jamie McIntyre.

Why Would You Trade Options?

Options Trading is a tern that generally makes many people think high risk, lose all your money. For the uneducated, and the person that can not stick to a trading plan, then I agree completely. However, if you do have a good Stock Market education, and can follow the rules of a trading plan, then options trading for a living may just be for you.

Options are financial derivatives, meaning their price is derived from the underlying share or stock price. As the stock price moves, so does the price of the option, only much more leveraged. This means, your wins could be magnified, as too can your losses.

To trade options for a living, does not mean you have to sit in front on a computer all day. Depending on which options strategy you are using, you may only have to look at the stock price once a day. Writing covered calls is a perfect example of this. On the other hand, if you trade directional options on an intraday basis, then you may be stuck looking at a screen the entire time that you are in the trade. The good news is, is that there is a happy medium for most traders.

Options trading can allow you to have a better balance of lifestyle, as it can certainly provide much more income than a job would ever bring most people, and it also allows you the time to do much better things in life that a regular job just does not allow for.

Before you rush out and quit your job to become an Options Trader though, you will want to have a good twelve months experience behind you, as well as a solid and tested trading strategy that allows for changing market conditions. What worked last year, may well not work now. Obviously you will also want to have a trading bank and plenty of money to pay the bills in the time that you are setting up.

Becoming a full time options trader is a great goal to move towards, yet you must ensure that you have the experience and foundations in place before jumping in the deep end.