Are you the type of person who
prefers to learn something in a group environment, rather than by yourself? May I suggest that you find a few friends, coworkers
or family members and make it a goal to learn to use options? You never know who’s interested in learning
new investment techniques until you ask.
One enjoyable way to learn
together is to form an investment club. If
you have the patience to refrain from investing real money before you are
ready, you can hold meetings (weekly recommended) at which each member discusses
a topic that he/she studied (books or internet) since the last meeting. You may also want to post a question or
comment here. You should open
a paper trading account with your broker and practice one or two option
strategies and discuss each position whenever you meet. Each member (or team of members, working
together) can ‘own’ one specific position and manage it (in the practice
account), as necessary. At the meeting, discuss:
- Why the position
- Why this specific
stock or index was chosen.
- Include profit
potential and risk.
- Is this a market
neutral strategy, or are you planning to benefit from a bullish or bearish move?
- Were any trades
made since the position was opened?
- Did you close the position to take your profits
or to take a loss and eliminate further risk?
- Was the position modified
(adjusted)? Why? This is a learning process
and this type of discussion is very helpful.
- Whether you are ready
to add another position to your practice portfolio. Do that only if you have meeting time for a
you don’t have more than two or three positions to discuss, each can get a
thorough airing. The purpose is not to
make money from these trades (yet), but to learn how to adopt, and manage, a
specific strategy. This is an excellent
method for getting a good options background. You have hands on practice, discuss the trades within your group, and
use fake money. It’s a fun way to learn
– if you have people who are really interested in learning. If these meetings become social gatherings, it
will not work. This is not your
traditional buy and hold investment club.
Not every member may be able
to contribute as much time as others. Those
with full time jobs can only spend evening hours on their individual education
and probably cannot be as active a member of one of the teams that manages a
position. But, those club members can
examine a position at night and suggest a trade to the rest of the team – a trade
that could be entered the following morning. You can make this work, no matter whether you are retired with lots of
spare time, someone who works at home who can grab a few minutes here and there
to watch his/her position, or someone who is too busy to get involved during
market hours. The most important qualification
to join this investment club is the desire to learn about options.
As you try different
strategies, you will discover which feel most comfortable for your group. You may prefer very conservative methods
where preserving capital comes first. Most
investors are interested in making money and you want to find a method that’s
profitable – and comfortable – at the same time. That’s not difficult.
If you already are a member
of an investment club, speak to the other members about learning to use
conservative options strategies to enhance your clubs performance. Come to the meeting prepared to discuss one
strategy, or bring along a copy of today’s blog.
If you open such a club,
consider posting that news and an occasional progress report.