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:
- 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
III. What would an intermediate level course contain?
to be continued…
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