Secret Advice from a Millionaire Options Trader
Updated: Nov 5
What the 1% does to successfully trade options
There's a reason why I trade options and not stocks. If you're unfamiliar with the difference between options and stocks, it's essentially this: Stocks are like owning a piece of a business whereas options are like buying insurance on that business. The reason I love trading options is that it allows me to make money no matter what happens in the market — even if the market goes up or down.
However, there are many things you need to consider before starting out as an options trader, including how much risk exposure you have (both financially and emotionally), how much time you want to spend researching trades (and what tools are available), how well informed your broker is about these instruments, etc...
That being said, here are some tips for getting started in option trading:
Know what you're getting into.
When you’re entering into a trade, make sure you know what you’re getting into. Here are some things to consider:
Know the risks involved.
Know the time frame of the trade.
Know the price of the underlying asset (i.e., stock or index) and its volatility (how much it fluctuates).
Have a plan.
There are two things that an options trader should do:
Know what you want to achieve (the goal) and make a plan.
Be flexible and adaptable in your approach, but don’t be afraid of making mistakes or failing.
Don't make it more difficult than it needs to be.
As you take your first steps into the world of options trading, it's important to keep in mind that options are not a get rich quick scheme. While they can be very profitable and easy to use, they're also one of the most complex and risky financial instruments available. It's important not to overcomplicate things or assume that because you've heard successful stories about other people making money with options that it will work for everyone.
Most importantly, don't trade options because you think it's an easy way to make money; if anything, this is probably the worst reason for getting involved in option trading!
Take advantage of the tools you have.
The tools you have are the internet, the resources that other people have, and those that you can find. You don’t have to be a financial expert or a math wizard to use these tools to your advantage.
In terms of using your broker's tools, they're really easy to figure out if you spend some time going through their websites. They'll walk you through step by step how everything works and what each tool does. Don't be afraid to ask questions! And remember: there's no such thing as a dumb question! If something doesn't make sense then ask someone who can help explain it better than anyone else could (that person being me).
Learn from other people's mistakes.
You can learn from other people’s mistakes.
Don’t be afraid to ask questions.
Don’t be afraid to learn, even if you know it will make you look stupid in front of your coworkers or friends.
Don’t be afraid to make mistakes, because that’s how we all grow and get better at what we do.
When I worked in the financial industry, I saw many traders come and go who had been around for decades, yet they were still making many of the same mistakes over and over again — whether it was an issue with their trading strategy or how they handled themselves during negotiations with clients — so I knew there was a lot more room for improvement than they realized!
Keep your emotions in check.
Remember, you’re trading options. You’re not trading stocks or futures, which are based on the value of an underlying asset. Options have their own rules and can be tricky to understand at first. If you get caught up in emotions while trading them, your losses will add up quickly and your account balance will suffer as a result.
When it comes time to make decisions about opening or closing trades, stick with the numbers and don’t let your feelings interfere with what they show you. A good rule of thumb is that if something doesn’t seem right (or if something feels too good), then it probably isn't right (or isn't too good). Don't let your confidence cloud things either; this is just as dangerous as letting fear dictate what happens next!
Do your research, know your options and always have a plan.
Don’t get emotional about it. This is one of the biggest mistakes people make when trading options. They are thinking about how much money they should make or lose on a certain trade rather than how to put themselves in a position to profit from their strategy. It’s important that you don’t let your emotions take over when making decisions because if you do, chances are high that it will end badly for you. You need to isolate them so they aren't part of the equation at all times when trading options—especially when things start coming up short!
Take advantage of everything available in front of you right now--whether its software tools like stock charts or technical analysis indicators like vwapindicator.com which is free with every SuperBearish Membership or even better yet - learning from other traders' mistakes (this last one being free!)
As you can see, there are many different ways to approach trading options. It’s up to you to decide which strategy suits your needs best. Whatever you do, just remember to always be prepared with a plan and some knowledge of how the market works.