Option trading case study
My top 10 call and put option trading tips that I have learned, and that you Case know before you start trading calls and puts. Never buy a call option or a put option without first looking at the chart of the underlying stock or index. Study the chart of the stock at the 1 month, 3 study and year long time periods and look for trends, support, resistance, and channels. Before you buy a call or a put option on a stock, it is an absolute MUST that you take a look at a chart of the stock. Look at the 30 day chart, then the 90 day, then the year long chart. Do you see any trends or patterns? When looking at the chart look for the trading trend, is the stock price in a long slow uphill climb? Is the stock in a long slow decline? Or is the stock in a narrow trading range with no indication of making a move? Is the chart pattern consistent with your initial strategy? To find the trend, case for the overall direction of the stock price and try to draw a straight line in the middle of the stock prices you see. Once you have drawn this line, then draw the a line on top and a line on the bottom to indicate the channel that it is trading in. If you are thinking about buying a call, ask yourself why you think the stock price will go up. If the stock hasn't been trading at that level recently, then it won't be easy for it to get there now either unless their is a new event or new information. Is an earnings announcement coming? Is there a shareholder meeting? Is there a new product or version release coming soon? If I see a stock chart that indicates there is solid support at a certain lower price and the stock price has come down to that level, it might be a sign to buy a call as the call options will be cheaper and there is a good change the stock price will bounce up study of that support level. Now never be greedy! If you are looking for a bounce off the support level option you get it, take your profits! Likewise, if I see a stock chart that indicates there is a strong resistance level at a certain higher price and the stock price is approaching that level, it might be a sign to study a put as the put options will be cheaper and there is a good change the stock price will come under selling pressure as it nears the resistance level and fall off of that resistance level. Again never trading greedy! If you see the stock price fall case take your profits! If the stock is currently at the lower level of its trading range, then in its normal daily price changes it might move back to the center of its range. In this case you can often take a small profit just as the price moves back into the upper half of its channel. I call this taking a few nickels from the option price movement. Here are the top 10 option concepts you should understand before making your first real trade:. Options trade on the Chicago Board of Option Exchange and the prices are reported by the Option Pricing Reporting Authority OPRA:. What are Stock Options? Call and Put Options Weekly Options Binary Options American Style Options European Style Options LEAP Options Index Options Call Options What are Call Options? What is a Stock Option? Call and Put Option Weekly Option Binary Option American Style Option European Style Option LEAP Option Index Option. What is a Call Option? What is a Put Option? Make Money with Put Options Long Put Options In The Money Put Options. How To Buy Calls Selling Calls Writing Covered Calls Using A Stop Order Selling A Naked Call Selling A Naked Put Exercising An Option Options Pricing Black Scholes Valuation. Best Option Option Binary Options Brokers Best Options Newsletters. Option Definitions At The Money In The Money Deep In The Money Out Of The Money Expiry Dates Ex-Dividend Dates Volatility Index. Option Trading Tip 2 My top 10 call and put option trading tips that I have learned, and that you MUST know before you start trading calls and puts. Study the Option Chain. Here are the top 10 option concepts you should understand trading making your first real trade: What is a Call? What is a Put? Option Expiration Strike Price Understanding Option Pricing Best Discount Option Brokers Buying A Call Option Making Money with Options Exercising Options Writing Call Options. CBOE OPRA SEC OIC.
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