How to change your mindset to an option trader?

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I have been blessed in that I have worked for and had clients who were Billionaires. But there is one Billionaire I met during my hedge fund days that I will never forget, because he was one of the best options traders I have ever seen. He had a 5 Step system for trading options that Best put option stocks use for my all my options trading today. This means you only buy an option when there is an event that will dramatically move the price of the stock up or down. These events or catalysts can be anything from: The key is to buy the option before this event occurs, best put option stocks never ever want to buy an option after the catalyst or event.

So in summary only buy an option when there is catalyst or event that will dramatically alter the price of the stock. An easy example of this is Earnings, you only want to buy an option that expires more than a week after the earnings date. Again this means when you buy an option make sure you leave yourself enough time so that your option does not expire before the catalyst or event occurs. But if its a high best put option stocks stock, I will only buy the option it gives me at least 25 times leverage or more on the stock.

Meaning divide the price of the stock by the actual option price. This means you want to buy options on stocks that have moved sideways of flat best put option stocks months at a time. Look at a chart if there has not been a significant uptrend or downtrend in the last 3 to 4 months, there is a good chance that the volatility in the stock is low and the options are cheap.

Also if you have options software, you can compare the stock and its options implied volatility and underlying volatility to its historical implied and underlying volatility. This may sound confusing but its the same premise value investors use, they best put option stocks stocks when they are cheap in comparison to what they historically sold for, so you want best put option stocks buy options when the volatility is low or lower than what it historically has sold for.

This is very important, too many people buy options with no exit plan or profit target. You have to set a goal or sell point when you buy an option and to make it worthwhile from a risk reward standpoint. Simply stated only buy an option when you have at least a 2 to 1 reward to risk scenario. Now I will give you a real life example of an options trade I just made, where I only followed 2 of the 5 steps and it cost me dearly on my trade. The option was very cheap I paid. I thought initially it would drop because the Job Numbers that were released 2 weeks ago would be strong and therefore would cause Silver to sell off.

So I learned first hand how much it can cost you by not following each and every one of the best put option stocks rules above. So my lesson to you is not only best put option stocks these 5 Rules for Trading Options important, but even more important is that you make sure before you buy an option that you have followed each and every one of the 5 rules I stated above.

Meaning do not buy best put option stocks option unless it meets each and every one best put option stocks the 5 rules. To make it easy for yourself print out these rules and then before you trade an option make sure that you can check off each rule before you buy the option.

If you do this I promise that not only will you greatly improve the success of your options trading but you will make a lot of money in the process as well. A Billionaires 5 Rules for Options Trading.

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What if you could buy stocks lower than the current market price? If either of those scenarios sounds appealing to you, then perhaps you should consider selling a cash-secured put.

But selling a cash-secured put gives you another method of buying the stock below the current market price, with the added benefit of receiving the premium from the sale of the put.

Sell an out-of-the-money put strike price below the stock price. In order to receive a desirable premium, a time frame to shoot for when selling the put is anywhere from days from expiration.

This will enable you to take advantage of accelerating time decay on the option's price as expiration approaches and hopefully provide enough premium to be worth your while. But what you consider a good return is up to you. Ideally, you want the stock price to dip slightly below the strike price, and stay there until expiration.

The premium received from selling the put can be applied to the cost of the shares, ultimately lowering the cost basis of the stock purchase. This is a great scenario. The bad news is you were wrong about the short-term movement of the stock. Plus, the cash you used to secure your put will be available to you for other trades. But look at the bright side. That would be worse, right? Plus, now that you own the stock, it might make a rebound.

This is obviously the worst-case scenario. But what if the stock does completely tank? There are a couple of things you can do. If you doubt the stock will make a recovery, your other choice is to close your position prior to expiration. That will remove any obligation you have to buy the stock.

To close your position, simply buy back the strike put. Keep in mind, the further the stock price goes down, the more expensive that will be. This scenario demonstrates the importance of having a stop-loss plan in place. This is much the same concept as a stop order you might have on stocks in your portfolio.

Selling cash-secured puts is a substitute for placing a limit order on a stock you wish to own. You receive a premium for selling the puts, and if the options are assigned, the premium can be applied to the purchase of the stock. Just remember, only sell puts on the number of shares you can reasonably afford to buy.

And have a stop-loss plan in place, in case the stock goes completely in the tank. Options involve risk and are not suitable for all investors. For more information, please review the Characteristics and Risks of Standardized Options brochure before you begin trading options. Options investors may lose the entire amount of their investment in a relatively short period of time. Multiple leg options strategies involve additional risks , and may result in complex tax treatments.

Please consult a tax professional prior to implementing these strategies. Implied volatility represents the consensus of the marketplace as to the future level of stock price volatility or the probability of reaching a specific price point.

The Greeks represent the consensus of the marketplace as to how the option will react to changes in certain variables associated with the pricing of an option contract.

There is no guarantee that the forecasts of implied volatility or the Greeks will be correct. Ally Invest provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. System response and access times may vary due to market conditions, system performance, and other factors. Content, research, tools, and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.

The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, are not guaranteed for accuracy or completeness, do not reflect actual investment results and are not guarantees of future results. All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns.

The Options Playbook Featuring 40 options strategies for bulls, bears, rookies, all-stars and everyone in between. Selling cash-secured puts on Stock you want to buy What if you could buy stocks lower than the current market price? How to do it Sell an out-of-the-money put strike price below the stock price. How might this trade pan out? The stock completely tanks This is obviously the worst-case scenario. The recap on the logic Selling cash-secured puts is a substitute for placing a limit order on a stock you wish to own.

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