Options Education: Course for Rookies

Options education is a topic that is near and dear to me.  I spend much time and effort helping readers understand how options work, rather than merely presenting a "do it this way" instruction manual.

The better that a trader understands the principles behind making intelligent trades and trade decisions, the better prepared that trader is to continue making good decisions on his/her own.

Options education is offered in several formats.  There are books, webinars, expensive weekend courses, individual (or group) mentoring, to name the most popular. 

Some people avoid the education process and prefer to pay others to suggest specific trades.  This is a non-starter for me.  I believe the trader must understand the trades being made and the rationale behind the trade.  Consider this:  How can someone pick trades for you and each of his/her other customers when that person has no idea of your investment goals, your risk tolerance, your investment time horizon etc?  It cannot be done.  Trusting your hard-earned cash to such 'trade pickers' is foolish at best.  It's okay to get suggestions, and then make the final decision on your own, but a basic understanding of options is required to make that judgment.

Blogs are a good source of information, with some, such as Options for Rookies, having education as the primary goal,  and others offering intelligent (or otherwise) commentary on a myriad of options-related topics.

Some information is free.  For example, most brokers provide education, usually in the form of written lessons or webinars.  The options exchanges also provide information as does the Options Industry Council (OIC).  Most blogs offer free content.

Other education requires payment of a fee.  Some courses are very expensive.  Some  are available at a more moderate cost.  The quality of the teachers, courses and the material taught runs the gamut from high to low quality and it's difficult to know what you are paying for, in advance.

I am preparing to enter this arena in a more formal manner.  My primary purpose is to fill what I see as a void. Potential option users ought to be able to

  • Get a good feel for options and how to use them
  • Decide if options trading fits into their investing style
  • Decide whether the investor can use options to hedge current and future investments
  • Understand risk and reward potential when using options
  • Learn all of the above at a very reasonable cost

We all acknowledge that options trading is not for everyone, but it should not cost an arm and a leg to discover whether options are a suitable investment tool.

And once the newcomer decides that options offer attractive opportunities, he/she should have an opportunity to get a sound, practical education at a reasonable cost.  The problem is that this newcomer does not know where to turn for help and is easily captured by television infomercials, full-page newspaper advertisements, or other hype on the Internet.  Impossible promises of success are touted, and the beginner has no idea that such promises are not going to be kept.  One such example is the 'promised' return of at least 10% every month.  As a result, many people who want to learn to use options pay large fees and are lucky if they find reputable teachers.

There's not much I can do to overcome the hype, but for people who make an effort to research education opportunities, I want to offer a basic course (plus other courses) that gives the new trader a better than average chance to succeed.  We've all heard the stories:  most beginning traders fail to make the grade.  I'd like to help increase the rookie's odds of becoming a winning trader, and to that end am developing a basic course for those option rookies.

If you are a regular follower of this blog, or if you have read The Rookie's Guide to Options, then you are aware of my teaching style, which includes the following:

  • Details
  • Explanations that make it easier to understand the basic concepts of options
  • Emphasis on risk management
  • Using examples
  • Repetition when necessary for emphasis
  • Replying to all questions

My plan is to construct a course that continues to do all those things.  Plus voluntary homework and optional tests.

I'm using today's post to request input from anyone willing to contribute. Suggestions, comments, questions are all welcome.  Please use the comment link below (all suggestions will be considered).

 

The beginner courses

I will begin by designing one (or more) course for rookies.  What should this course look like?  Here are some thoughts:

I. A multi-week, comprehensive course that provides a thorough introduction to options, including enough information for students to begin trading with confidence.  It would include all the material below, plus more.

  • Written lessons that look like lengthy blog posts or short book chapters.  Each focusing on a specific topic.
  • Video webinars that similarly cover one specific topic
  • Occasional live Question and Answer sessions.  The difficulty with 'live' sessions is that it's impossible to find a time that is suitable for everyone. A recorded session will allow those who cannot attend to view the content.
  • A special page (for course takers only) where questions, based on the course, can be posted.   'Regular' questions can still be asked through the Options for Rookies blog

Should the course include time for individual mentoring?  The feasibility of this idea would be based on the number of students in the class.

How long should this course run?  How many lessons? Currently, the plan is 13-weeks with four or five lessons per week.  Comments?

These last two items affect the cost.

 

II. Shorter courses, each dedicated to teaching one specific aspect of option trading

  • A thorough discussion of one specific strategy, soup to nuts. Inlcuding what to look for when initiating the trade, risk management suggestions and making plans to exit the trade.  One obvious course is: iron condors.
  • A general introduction to several strategies.  Enough to get you started using these methods (preferably in a paper-trading account), but  much less in depth treatment that the iron condor example mentioned above.  The benefit of this course is to give a rookie options trader a 'taste' of what can be done when trading options.  This course is truly not designed to be used as the gateway to trading.  It's designed to provide a better idea of where the student's interest lies.  Risk management would be discussed only briefly. 
  • How to design, write and maintain effective trading plans
  • Risk Management for option traders.  An introduction
  • Synthetic equivalents and how to use them
  • My philosophy of trading, as developed over the past 34 years

Intermediate Courses

III. What would an intermediate level course contain?

to be continued…

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16 Responses to Options Education: Course for Rookies

  1. Danny 10/18/2010 at 12:06 PM #

    Hey Mark,
    First and foremost, thank you for everything.
    I follow your blog everyday. I can’t say I’m a successful trader yet, but I think I make better decisions today, and a lot of it is thanks to you.
    I know you do everything for free, so I’m super grateful for this. It is very refreshing to see your attitude in the sea of charlatans online selling various options advice/trades.
    I would definitely support any paid features (as long as I can afford them of course).
    That said, I think everyone would be happy to see live trades that you do and real time adjustments and the reasoning behind those adjustments. (perhaps via twitter)
    As far as I’m concerned it is not for following the trade (I might follow it in my paper account), but more for getting a better feel for your decision making process.
    It’s one thing to follow from the sidelines and another to be right there in the trenches with you experiencing the ups and down and still (hopefully) making good choices.
    Perhaps that could be one of the advanced education options?
    Thanks again for everything. I can’t tell you how much I appreciate your efforts and your precise honesty.
    – Danny

  2. jesse 10/18/2010 at 7:24 PM #

    Mark,
    You’re a genuine educator with practical option trading experience plus a burning desire to impart your knowledge to us, really appreciate it, you have my full support.

  3. Mark Wolfinger 10/18/2010 at 8:08 PM #

    Danny,
    Thanks so much. Input appreciated.
    I know that ‘following live trades’ is something of interest becasue that topic has been discussed previously.
    Right now I’m planning a rookies course that would include live trades – but not from the beginning. First we get ready to trade.

  4. Mark Wolfinger 10/18/2010 at 8:08 PM #

    Jesse,
    Thank you

  5. SM 10/18/2010 at 8:28 PM #

    Mark,
    I’d definitely be interested in such a course. I read the blog and find it helpful. Some comments:
    1. On schedule, I’d suggest something less fast paced for two reasons — a) given than folks like me don’t trade for a living, 3-4 days per week is pretty fast paced. 2-3 times would be better; and b) it’ll give folks more time to digest the info better yielding better results over time.
    2. Will there be a common set of tools used/provided? Folks have varying tools and it may help to be on the same platform. I use Thinkorswim and really like it but better ones may exist.
    3. I’d suggest also having some case studies –> common situations that a trader faces that often causes heartache. Examples include earnings, protecting positions, estimating bearishness/bullishness in a stock and how to hedge that out, etc. You know these better than me!!
    4. I’d suggest a more “friendly” intro course pricing. This will give people a better feel for options, the course and their future with options. An intermediate course would be an obvious follow-on for more advanced users.
    Hope this helps! Best wishes,
    SM

  6. Mark Wolfinger 10/18/2010 at 9:21 PM #

    SM,
    1) Agree with more time to digest.
    One alternative is to offer material at specific pace requested by each participant – with the ability to increase or decrease pace.
    2) TOS does offer outstanding tools. However, it’s far more sophistication than I need.
    Good idea. I will look into getting one specific trading platform that everyone can use. Then you can use TOS, the alternative, or both.
    3) Facing commons situations that can result in problems is something that must be included. I’m pleased we agree.
    Estimating bullishness.bearishness is something that I just cannot do. I mean that literally. I never know in which direction a stock (or the market) is likley to move)
    4) I will not be charging a high price. Short courses will be modest and if I go ahead with that 60 to 75 lesson course (at a reduced pace), it will be very reasonable.
    I will also offer a special discount to those who sign up early – when I get this project going.
    I appreciate your ideas. Thank you.

  7. Jcvictory 10/18/2010 at 10:05 PM #

    Mark,
    I think an intermediate level course should cover different kinds of insurance for condors and (most importantly) how to manage that insurance. Putting the insurance on seems easy, it’s the adding, closing and rolling of insurance that seems to get tricky.
    Thanks,
    James

  8. Mark Wolfinger 10/19/2010 at 6:05 AM #

    James,
    Good idea. I’ve never written about that topic with the detail it deserves.

  9. Kyle 10/19/2010 at 9:19 PM #

    Mark,
    Very excited to hear about the possibility of more formal training options. I’ve read your books and follow your blog so I’ve got a solid beginner understanding of options.
    Things I’d like to see in an intermediate course:
    – Like the idea of a soup to nuts course covering iron condors.
    – Case studies of specific situations once a position has been open
    – Following a “live” trade from start to finish during the course of the class would be nice as well.
    – Also, maybe 2 installments per week would be enough. (4-5 is probably more than I could commit to with work/kids/etc).
    Looking forward to seeing what you decide to do.
    Thanks,
    Kyle

  10. Mark Wolfinger 10/19/2010 at 9:51 PM #

    Kyle,
    Thanks for the comments.
    I’ll solve the ‘too many lessons per week’ problem. I already have one good idea for accomplishing that.

  11. Garth 10/20/2010 at 10:19 PM #

    Hi Mark,
    I’m under a paid mentorship program with someone else, and the most powerful thing about a training program is the -feedback-.
    Any sufficiently motivated trader can get a huge amount of learning from blogs, books, DVDs, webinars, podcasts etc. Lack of knowledge is not the problem, lack of applied knowledge is.
    Get you students to open up a simulation account as soon as possible and start trading it. Get them to write diaries and take snapshots of their trades and send everything to you. Then discuss the mistakes and strategies as a group and how to improve them.
    Knowledge -> Application -> Feedback -> Loop
    In at least a weekly format (preferably bi-weekly), with the expection that such a training would take a minimum of 12 months to complete.
    It’s a lot of work, but then you’ll be churning out real traders on a consistant basis, rather than churning out half educated people who are still confused about what to do next.

  12. Mark Wolfinger 10/20/2010 at 10:29 PM #

    Garth,
    Thank you. Excellent ideas. I agree that it’s a lot of work, but if it works as well as you suggest, it would be worthwhile for everyone.
    I recognize that a mentorship program costs far more than a ‘course,’ but as you point out, the quality of the education can be significantly better – depending on the ability of the person running the program.
    The one question that appears (to me) difficult to overcome – is to find an appropriate time for the ‘group’ meeting.
    Thanks again

  13. Garth 10/20/2010 at 11:32 PM #

    Mark,
    I wouldn’t be too worried about the accessibility of the group time.
    To me a mentor who is committed to my success and long term growth -is- the Holy Grail. It’s the thing that’s really hard to find in the industry. Most educational resources just fill you up with facts and send you on your way. You’ll have people falling all over themselves to attend if the quality of applied education is high enough.
    If it helps, the class I attend is at market close (4:30 US Eastern) and we regularly have people from the States, UK, Japan and Australia attend.
    The internet does asychronus education really well, so just record the meetings and answer any emailed questions in class, with the expenctancy that your students will be watching the uploaded recording by the end of the week.

  14. Mark Wolfinger 10/21/2010 at 7:52 AM #

    Garth,
    Invaluable information.
    Many thanks

  15. Brendan 10/21/2010 at 8:44 PM #

    I’d dig the following, Mark:
    – “Basic Training Course” (mirroring the best of your ideas and those of fellow readers, and also bringing portions of your blog and books to life)
    – Intermediate courses devoted to specific strategies (in other words, “Covered Calls in Depth,” and “Concepts in Collaring,” as well as “Intermediate & Advanced Iron Condor Strategies.”) as opposed to a broad intermediate course.
    Nice new collar post too, by the way.
    Take care,
    B.

  16. Mark Wolfinger 10/21/2010 at 9:31 PM #

    Brendan,
    Appreciate the ideas. Thanks