Online Option Trading

Home Page: Hi, and a very warm welcome to my site which I hope will teach you everything you need to know about how to start trading options online, whether these be options, equity options, or EFT's ( exchange traded funds). As you may know I am a full time trader myself, and I know from personal experience how difficult it can be, to find informative and helpful sites online when you are starting out - hopefully this one will help! I do have several others on various aspects of trading, all free, so if you would like to have a look at these please click on the Making Bread Home Page above ( or here ), and it will take you there. Again all the information and advice is provided free.

As always, I have tried to explain everything about options clearly and simply, but if you do have any trading questions then please just click the button above and ask! I love to hear from people from around the world, and if I can help you a little I would be delighted.  Again, this is free as I feel there are enough people out there trying to make money from novice traders !

If you would like to follow some of my trades, I do post regularly on Twitter which is often called a "micro blogging" service. For those of you who are not familiar with it, it is simply a quick way to stay in touch with friends, family and news. You only link to people who are of interest to you, and the longest message is limited to 140 characters, so messages are short and sweet! It is ideal for me as I can update very quickly from my screen with details of possible trades, opportunities, news and also details of when my other sites have had new posts added, so you are always in touch. If you would like to follow me, and you already have a Twitter account, please just click on the "follow me on twitter" link above, or alternatively open an account with Twitter and then follow me. In addition I am also on Facebook, and MySpace, and would be delighted to hear from you there. I will shortly be opening a trading room on FriendFeed which will be available for you to meet other traders and investors and to discuss trading ideas, problems and strategies, along with access to my own trading suggestions. So there is a great deal going on at the moment, and please don't forget, you can always ask me a question at the new 'Ask Anna' site, or simply review trading questions asked by others so I hope you enjoy this new site.

I am in the process of updating all my sites which will include daily posts and videos by me, about future market directions, suggested trades, and opportunities for future trades. In addition when a site has been updated with a new post or video then these details will also appear immediately, which I hope you will find useful, and I look forward to welcoming you via one of the above.

Online Option Trading : Introduction

OK, let's start with some basics. One of the great misconceptions of trading options is that they high risk. Whilst it is true that certain strategies have a very high risk element, in many cases it is possible to trade them using a low risk strategy. Indeed, options were originally introduced as a hedging tool, an insurance policy if you like, where traders bought an option in order to hedge against another position, in case the trade moved the opposite way. Originally introduced in the US in the late 60's, online trading in options has grown dramatically, and with the advent of the internet, they have moved from the preserve of the institutions and money managers, to the online retail trader and investor. The options market in the US ( the largest in the world ) trades over 4.5 million contracts daily, and rising. Clearly options trading is fast becoming an extremely popular instrument to trade, and whilst there are risks, all the techniques and strategies I teach are designed to be low risk. As I said earlier options were originally introduced so that other trades could be hedged or protected, and whilst they can be traded in their own right, they are often used in conjunction with other instruments, such as stocks, to provide low risk trading opportunities.

Now, before we move on, a little about the regulatory bodies which govern the financial industries. In the USA the financial markets are regulated the SEC, the Securities and Exchange Commission, and their mission statement is to protect retail investors and traders to ensure an orderly trading market. The site is well worth a visit as it contains a host of useful information, but if only go there once, please check the credit worthiness of your online broker. Brokers, can and do go bust, so please check them first on the SEC site. In the UK it is the FSA ( the Financial Services Authority). Most countries will have a regulatory authority, so please visit their site online which will generally provide some very useful information.

Online Option Trading : Option Types

Options first appeared in the early 19th Century in America, and were know then as privileges. These privileges or contracts were actually written by hand, a term which has applied ever since. The hand written contract was then sold by the writer to the buyer. So for 'writing' read 'seller'.  It was not until the late 1960's and early 1970's that options began to be traded more widely, largely due to the standardization following the establishment of an intermediary known as the Options Clearing Corporation or OCC. IN 1973 the CBOE ( Chicago Board of Exchange ) took control of options trading and since then several other exchanges in the USA have introduced options trading. In the UK options are controlled on the LIFFE London International Finance and Futures Option Exchange, which was taken over by Euronext in 2002. Early in 2007 Euronext merged with the New York Stock Exchange. All options are now traded electronically online. Before we begin to look at what an option is, and all the terminology of options trading, it is important that you understand the different types available. Most new traders start with equity options, which will be the basis of the next few pages, but there are several others which are as follows :

Now, as you can see there are several different types of option available to trade, and for the remainder of this site we will concentrate on the first of the these, the equity option, but don't worry - all the information I provide is relevant to all options, whichever you decide to trade online, as the underlying principles are the same, whether you are trading equity options, EFT's or Index options. So let's look at what an option is and how it works

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