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Options for Rookies is an educational blog, with an emphasis on information that is especially beneficial to the rookies trader. As steady readers know, we also post stories for the more experienced trader.

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9 Responses to Subscribe to mailing list

  1. Ray Grier 04/04/2011 at 8:42 PM #

    Today’s my lucky day, I found your site.

    Think or Swim recently annouced a new options trading platform will be available in May.
    Have you experienced OptionsXpress or TradeMonster platforms ? I plan to make duplicate paper trades with 2 brokerages. Any suggestions for a user friendly platform to papertrade?

    Ray

    (562) 961.0500

    • Mark D Wolfinger 04/04/2011 at 8:58 PM #

      Thanks Ray,

      I have tried both OR and tM platforms for paper trading, Neither worke3d for me. the problem is hat the customer must pay the offer and sell the bid to get filled. That’s hardly realistic.

      That works for learning to use the software, but not to learn about trading.

      They are all user friendly. But they are not ‘trade execution’ friendly!

      Regards

  2. LS Mong 10/28/2011 at 3:12 PM #

    Hi Mark,
    I read both of you free e-books. I heard you initially on TradeKing and was impressed with your spontaneous responses! It’s apparent you’re a young pup like me. I’m a retire 35 yr. public accountant + 6 yrs in the corporate world at the end before hanging up the cleats, glove etc.. In the last couple yrs I’ve committed to taking chg of my family IRA’s and have focused on Dividend investing preferring monthlys plus a trading focus on quarterly dividend Ex-date targets with a fair amount of success. My most serious trading flaw is failing to place a Sell Stop Loss to protect the juicy gains and many times end up giving it all back particularly with the unprecedented Flash Crash we’ve seen this yr..
    My motive (always growing the nest egg / war chest) is reducing the investment risk exposure. Example: With trying to limit investment to increments of 2500 to 3000 with occasional exceptions if I see a stock ABC with an attractive low entry point of say $25 /shr with a historical upside potential of making a say anywhere from$75 to $125 and say 7 to 10 mkt days out away from the day-before Div. Ex-Date…I must pony up $2500 ( 100shrs @ 25)! Not a bad return 4 to 5 % but the Cash Exposure is high! and if you have 10 or more of these in various stages of executing your flat out exposed. So with the continuous asking the What IF Scenario???..the obvious is How Can I Reduce the Investment Exposure risk with the potential of more securely generating the same level of returns.
    I’ve become intrigued with the core use of Candlestick chart reading and particularly when tied to options and yet I did’nt see any mention in your two e-books?
    My other point is from my reading a boat load of internet option promotions and various other articles, I’ve been lead perhaps falsely that for beginners / rookies…Buy / Sell Calls particularly in an uptrend (Bull) mkt and Buy / Sell Puts in a downtrend (Bear) mkt were some of the core basic strategies that were touted. Sorry for being long winded. I’d be coureous what your thoughts / comments are on these two concerns? Thanks again for contributing to raising my option knowledge level! Larry

    • Mark D Wolfinger 11/01/2011 at 1:31 PM #

      Larry,

      Stop-losses are okay, but in reality it is very difficult for individual investors to pull the trigger. It’;s common to believe that stocks will soon return to their previous price level. That’s foolish thinking. Markets move up and down.

      I am an options educator. I want students to learn how options work. I do not encourage playing the markets or using technical analysis. If you learn how to use options and truly understand them, then you will be able to play your game of predicting direction more efficiently. But I cannot help with that aspect of trading.

      It’s a good idea to limit exposure. It’s a good idea to limit each investment to a certain number of $. However, I hope you are willing to trade some stocks in odd lots. It’s not a good idea to limit your trading to stocks under $30.

      You can reduce exposure by a huge amount, but you must accept the fact that the returns will be a bit less. Instead of buying the stock and paying $2,500, but one call option with a strike price of $20. That may cost ~$600. If the stock moves to 21 – where you would take your $100 profit, you can sell the call option and collect roughly $75 to 85. Much less risk. Similar reward. But no dividends when you own calls instead of stock.

      Buying options is a very difficult game. The trader must be correct on direction, size of move, and timing. That’s is very difficult. Those who tout buying options are lying to you. It’s as simple as that.

      Selling options is better – but you must NEVER sell naked options. Only sell spreads which come with limited losses.

  3. LS Mong 11/01/2011 at 3:31 PM #

    Mark, Thanks for your response. With my very limited knowledge, which is growing by the minute & day from reading a bunch on the internet…I’m beginning to lean towards Selling puts and buying puts particularly in this Bearish mkt with many opportunities. (Profiting when the stocks go down in value)
    Not always in the order below but sometimes.

    Example: Say I’d like to buy (this might be a bit large) a 1000 shares of XYZ that’s currently trading at $28 but at a lower price say $27.50. From what I’ve crasped so far, I could
    Sell 10 contracts of $27.50 Puts to Open and say put price is $1.10 Premuim per Contract.
    So far I’d receive (in this examplle) $1,100, and at $27,50 since below the $28.00 would be in
    In The Money (ITM). So my choices are (as I see it):
    1. Wait until the Expiration Date particularly if Expiration is close by and my Sell Options become Worthless.
    2. If the actual underlying stock price goes up to where it’s At-The-Money (ATM) or above the Strike price Out-of-the-money (OTM) say at $28.50 …where Now my Put Contracts begin lose
    their Value and say are worth $.30 Premuim per Contract X’s 1000 = $300.
    I could now choose to Buy to Close my Put Contracts (the reverse of the original Sell Puts to Open). Myunderstanding is this would Cose the Transaction…Selling High and Buying Low.
    Not Bad…Received / Sell at $1,100 and close / Buy at $300= Net of approx. $800. A simlistic example but the important thing is that the Rational, sequent of events, my reaction /adjustment, and focusing on the most positive outcome in this scenario.
    Mark…Your comments /respnse / corrections would be most welcome! I respect your many years of experience / paying your dues & price. Larry

  4. LS Mong 11/01/2011 at 11:12 PM #

    Mark…my apology. In re-reading above scenario I need to Amend. Still working on nailing down definitively the option glossary terms.
    With Put Options…when the underlying stock is Above the Strike Price it’s (OTM) Out-of-the money. Therfore, when the reverse occurs that the underlying stock is Below the Strike Price is (ITM) In-the-money. I got them swithed arround above. The rationale and sequence of steps was I believe on target but the above needs corrected as follows:
    Above # 1. ITM should be replaced with OTM since $28.00 is above the Strike Price of $27.50.
    # 2. is ok except should be clarified to say when the underlying stock goes Down to where it’s ATM (instead of Up) to ATM……
    My biggest challenge is to realize that in Selling a Put your betting against the buyers hope of the underlying stock going down bellow the Strike Price and as a Put Seller your betting the underlying price goes up or the buyer doesn’t get his/her wish.
    Hopefully, this hasn’t drowned you in detail. Still reflects numerous profit opportunities for a Put Option seller particularly if the likelyhood of the underlying stock is to rise above the Strike Price. Larry

  5. D Chen 09/10/2012 at 5:06 PM #

    Hello, I’m not quite sure of the procedure to subscribe to the e-mail list. Perhaps it’s by submitting this comment?

    Thanks,
    D.

  6. Mark 10/13/2013 at 7:13 AM #

    Mark, I have traded options but am no expert. I have done Iron Condors, covered calls & long puts & calls. I havent read any of your books but I’m intrigued by your comments to ignore TA. Can you please explain how you trade options without some knowledge of TA? Regards Mark.

    • Mark D Wolfinger 10/14/2013 at 8:47 AM #

      Mark,

      I suggest that TA is difficult to master and that too many people believe they know how to use it and then suffer the consequences of drawing poor conclusions from the charts. Thus, to me, it is more efficient to trade with zero market bias.

      On the other hand, if a trader makes a real effort (that does not mean one hour of study) to read and understand a variety of charts, and then uses TA as a general guide, without believing that the charts provide all the answers – then TA can help the trader find better entry/exit points.

      My disclaimer: I am not saying that TA does not work. I am saying that it is far more difficult than most people believe and thus, can provide overconfidence which leads to failure.

      Choice one: Assume market direction is not knowable. Trade a market-neutral iron condor at any time. Obviously trader can take a bullish or bearish bias when he feels he has a good reason for doing so. But I advise against that unless that trader has a proven track record of being able to predict direction.

      Choice two: Don’t ignore TA. Use it gently to suggest entry points. Sell call spreads near resistance and sell put spreads near support. Then if support or resistance is broken, the trad can be exited with a smallish loss.

      Choice three: Depend on TA to identify the major trend and only sell call spreads or put spreads (rather than both) to go along with the trend. This is also a difficult task, but the good part is that you do not get caught in having a string of losing trades when there is a strong market trend.

      Bottom line: Use TA if you believe you have the skills. But, as a beginner, be very certain that you establish a track record (keep a log of your predictions from TA and be very honest in evaluating the results. Make these trades in a paper-trading account, or just record your trade ideas in writing. Do not use a real account) where you have an edge from using TA before using it to make trade decisions that involve real money.