Trading Options For Dummies is all about introducing you to option strategies for managing risk, delivering profits, and navigating a variety of market conditions. Yet, unlike other investments books, this one is geared to managing risk first, with the knowledge that profits will follow. With that in mind, the approaches described here focus on reducing potential losses from traditional stock positions and building an option strategy repertoire that’s designed to increase your chances of making sound trades whether the markets are moving up, down, or sideways. To incorporate the comprehensive steps required when trading, it also provides discussions on market and sector analysis, as well as things to look for when trying out a new strategy.
An option contract is a unique security that comes with contract rights and obligations. When used correctly, an option contract strikes a balance between the risk of loss, the amount of money you put at risk, and reward, providing you with leverage while still allowing you to reduce overall trade risk. Of course, there’s another side to that leverage, increased risk, which will be managed, which is the main reason you should take the time to read through this book carefully. You need to understand the risks and characteristics associated with these contracts.
When applying for options trading with your broker, the broker will send you the reference guide Characteristics and Risks of Standardized Options. This publication, written by the Options Clearing Corporation (OCC), must be distributed by brokers to their clients prior to allowing them to trade options. It describes option contract specifications, mechanics, and the risks associated with the security. Together, that publication and the one you’re reading right now help you to understand your risks and use options effectively.
- Options Trading and the Individual Investor
- Introducing Options
- Trading Places: Where the Action Happens
- Option Risks and Rewards
- Analyzing Mood Swings in the Market
- Sector Analysis: Technical and Fundamental
- Practicing Before You Swing
- Designing a Killer Trading Plan
- Getting to Know Different Option Styles
- Protecting Your Portfolio with Options
- Increasing Profit Potential and Decreasing Risk
- Combination Strategies: Spreads and Other Wild Things
- ETFs, Options, and Other Useful Tricks
- Making Money without Worrying About the Market’s Direction
- Letting Volatility Show You the Way to Trading Opportunities
- Trading Profitably When Markets Move Sideways
- Ten Top Option Strategies
- Ten Do’s and Don’ts in Options Trading