Last update: July 2021
As a new trader, you will hear a lot of veterans talk about using options. The value, leverage, creativity and control you can get from trading options is empowering. As you start your journey trading options you need to have a clear vision of where you want to take your business. This is the first post in a series I’ll be calling Options 101. The goal of these posts is to educate you as a Tackle Trading team member and help you develop the right perspective on how to use options in your business. Later, I’ll add in educational videos and segments to supplement the conversation and education.
The first thing you need to consider is that the options market is both simple and complex all at the same time. What are your goals? Options can be the center-piece of a trading business or they can supplement a retirement account. Are you going to use options as your primary trading vehicle or are you going to use them to supplement stock, ETF, futures, and forex positions? You may not know the answer right now. But consider developing a long-term strategy to help you along the way.
Speculation
Options strategies fall into a few different categories. First, is speculative. Strategies like long calls, long puts, vertical spreads, ratio spreads, and exotic spreads can all be speculative. Speculative strategies are dependent on you selecting either the direction of a security or the volatility of a security to profit over time. Are you good at reading charts? Do you understand the implied volatility changes to underlying options? If yes, then speculative strategies will be great for you. If no, or not yet, then practice speculative strategies for now and focus on other areas options as well.
Cashflow
The second area of options strategies are cashflow strategies. Covered calls, naked puts, vertical credit spreads, Iron Condors, calendar or time spreads and other theta positive strategies all fall into cash flow techniques. You can build an entire trading business around using cash-flow techniques. You will need to develop the skill-set needed to select appropriate stocks, learn how to price options and learn how to get fills on your credit trades that will help you build your business. Cash flow is one of the best businesses to build when you’re new to trading.
Bi-Directional
The last area of options trading I’m going to highlight today is bi-directional. Bi-directional options strategies include inverted butterflies, straddles, strangles, debicon’s (a favorite discussed on the coaches show regularly) and other options strategies that benefit from a move from the underlying stock going either up or down. If you prefer trading volatility – instead of direction – of an underlying stock. Then bi-directional strategies will be an area you will want to focus on.
There are many brokers that trade options. Some brokers have restrictions on who is eligible to trade options. When you sign up for a broker you will be given a trading level. If you want to trade more advanced strategies you will need to apply for a higher trading level to qualify for those techniques. Consider this – when you start trading you may only be eligible for certain options strategies. That may limit what you can do in your live account. But it doesn’t limit what you can practice in your paper account. Trade the strategies that you want to use long-term in your business. As I say frequently to new traders – trade what you know and practice what you don’t.
Practice First
Before you jump into a live account and start trading options you should practice. Practice makes perfect. If you’re starting a new business, a good rule of thumb is to get 50-100 practice trades on a strategy before you take it live. Remember, there will be plenty of time to trade in the live market. It’s important that you test out your strategies and make sure you know how to MANAGE them as well as enter them.
Based on your account type and your investment objectives you will want to focus on one type of strategy as your primary strategy. Many traders develop a few strategies and try to perfect them. Some of our best traders that we’ve trained over the years only use a few strategies to run their business. You don’t have to do everything, but whatever path you choose you need to commit to learning every step of an options trade. Research, entry, management, exit, and evaluation. All of these phases of a trade are important.
Options Trading for Beginners
Continue learning the basics of Options trading with this additional freemium content from Tackle Trading.
Options 101 [Free Content]
Access more free high-quality articles to improve your knowledge of Options Trading.
Options for Beginners: Meet a Popular Greek Named “Delta”
In this article, Gino Poore delivers a great lesson on understanding and using the Delta of an option.
How to add Insurance to your Portfolio
In this video tutorial, Coach Matt takes a look at different ways to protect your portfolio accounts when the market goes south.
Options 101: Getting Started
The goal of this Options 101 series is to educate you as a trader and help you develop the right perspective on how to use options in your business.
Options 101: Expiration, Strikes, and Basics
Learn the basics on what is an option, options expirations, call and put options and also strike prices.
Options 101: Bid/Ask, Open Interest and Volume
In this Options 101 article, we will look at the Bid/Ask spread, open interest, volume, and how these characteristics affect a trader’s decision-making.
Options 101: The Language of Options
In this article, we’ll dive into some of the language and definitions you’ll hear as an options trader.
Options 101: Naked Put Basics video
In this video edition of the series, Coach T examines the basics of the Naked Put strategy.
Options 101: Managing Credit Spreads (Thinkorswim Tutorial)
In this tutorial video, Coach T shows how to manage a credit spread and how to set up a contingency in ThinkOrSwim.
Options 101: Bull Put Spread Research
In this video, Coach Tim walks you through how to find candidates for bull put spreads.
Options 101: Risk Graph Basics (Thinkorswim Tutorial)
In this Thinkorswim tutorial video, Coach T walks the team through how to use the risk graph for options trading.
Options 101: How to set Basic Stops on Naked Puts and Covered Calls
In this video tutorial, Coach T walks the team through how to set a basic stop on a covered call or naked put position.
How to Protect Your Retirement
Coach Matt from Tackle Trading looks at how passive and active investors can insure their retirements against another potential market crash like in the sub-prime crisis of 2008-09.
How to use the Theta Research Tool to find the best stocks for Cash Flow
In this video tutorial, Coach Matt goes through the latest edition of the Options Research Spreadsheet explaining how to use it to find the best stocks to cash flow.
Options 101: How to Add a Protective Put to A Covered Call
In this video, Tackle Trading’s Coach Tim explains when, how, and why a trader would buy a put option on a covered call position.
Tales of a Technician: Quell your Unfounded Assignment Fears
The assignment hobgoblin has been haunting the dreams of novice traders since the dawn of the options market.
Options 101: How to protect against earnings risk
In this video, Coach Matt shows new traders how to protect against the earnings risk and still cash flow with the covered call.
Trade Journal Series: How to use the Theta Research to find Covered Call candidates
In this video tutorial, Coach Tim Justice teaches how to find the best candidates to trade the Covered Call options strategy using the Theta Research tool.
Tales of a Technician: Delta Limits
“On Delta trading, what would be a reasonable delta limit for my portfolio?” Let’s hop to it.
Women In Trading: Options – My new love language
Let us talk options basics. Let me try to help you make sense of it all.
Options Theory: Long Calls
The long call is a seductive chap. Today kicks off the first in a multi-part series on options strategies.
Options Theory: Naked Put Basics
Today we turn to a popular cash flow strategy: the Naked Put. Come learn the basics.
Options Theory: The Protective Put
The options realm is an insurance marketplace where stock owners can acquire protection against loss in their beloved equities.
Options Theory: Delta, the Great Equalizer
I love the options greeks for many reasons. One will be on full display today. Delta is a multi-faceted metric used by traders a variety of ways. Perhaps one of my favorites is to use it as an equalizer.
Options Greeks Guide Part 2: What Is The Black-Scholes Model
What is the Black-Scholes Model and how to use it in your trading? This is what this video will cover.
Options Greeks Guide Part 3: What Is Delta
Delta is the most famous options Greek. Come learn what Delta is and how it can help you become a better trader.
Options Greeks Guide Part 4: What Is Theta
To professional traders, Theta means CASH FLOW and PASSIVE INCOME. Come learn more about this powerful option Greek and how it can benefit your trading skills.
Options Greeks Guide Part 5: What Is Vega
How does Vega work? What is the correlation between Vega and volatility? How does it affect options premium? That is what you will learn in this video.
Options Greeks Guide Part 6: What Is Gamma
What is the correlation between Gamma and Delta and how does that impact your trading business? Learn more about this underrated option Greek in this video.
Options Greeks Guide Part 7: What Is Rho
What is Rho? How does Rho affect options premium? This is what you will learn in the latest episode of this Options Greeks video series.
Options Theory: What is Implied Volatility Rank?
In this week’s video, I’ll show you how to understand Implied Volatility (IV) and Implied Volatility Rank (IV Rank).
Tackle Today: Call Options
Call Options is all about leverage and limited liability. Read further.
Tackle Today: Options Greeks Webinar
Mark your calendars for Monday, Feb 28th. On our YouTube Channel at 8:30 PM EST, I’ll be hosting a webinar titled Options Greeks for Beginners.
Tackle Today: Delta is for Direction
Delta might be the most fascinating Greek for the simple fact that it is multi-dimensional.
Tackle Today: Delta Brings Precision to Probability
Delta measures the probability of an option expiring in-the-money.
Tackle Today: Theta & Time Decay
Theta measures how much an option loses in value per day.
Tackle Today: Vega & Volatility
Volatility plays a significant role in options pricing. Read further.
Tackle Today: Gamma & Velocity
As a final message to prepare you to tonight’s webinar, let’s talk about option greek gamma.
The Options Heuristic Series [Free Content]
How can we explain the basics of Options so that our students can really learn, without getting confused with so many concepts, terminologies, and strategies? That’s the idea behind the series.
Options Greeks Guide [Free Content]
The Options Greek Guide is a simple, powerful resource to help you better understand how to use the Greek’s.
As you build, enter, and manage Options Trades, it’s helpful to understand the math behind the Black Scholes Option Pricing Model. Using the Options Greek Guide will give you the information and training on how time, volatility and asset price changes impact options values.
Options Greeks Guide Part 1: What Are Options Greeks
What are the Options Greeks and how can you utilize them in your trading routine in order to perform better in the market? This is what you will be learning in this video series.
Options Greeks Guide Part 2: What Is The Black-Scholes Model
What is the Black-Scholes Model and how to use it in your trading? This is what this video will cover.
Options Greeks Guide Part 3: What Is Delta
Delta is the most famous options Greek. Come learn what Delta is and how it can help you become a better trader.
Options Greeks Guide Part 4: What Is Theta
To professional traders, Theta means CASH FLOW and PASSIVE INCOME. Come learn more about this powerful option Greek and how it can benefit your trading skills.
Options Greeks Guide Part 5: What Is Vega
How does Vega work? What is the correlation between Vega and volatility? How does it affect options premium? That is what you will learn in this video.
Options Greeks Guide Part 6: What Is Gamma
What is the correlation between Gamma and Delta and how does that impact your trading business? Learn more about this underrated option Greek in this video.
Options Greeks Guide Part 7: What Is Rho
What is Rho? How does Rho affect options premium? This is what you will learn in the latest episode of this Options Greeks video series.
Options 101 Course [Premium Content]
The Options 101 Course is exclusive to PRO members. Try it for free for 15 days by clicking on the button below.
Options Report [Premium Content]
The Options Report is a weekly briefing delivered to Pro members of Tackle Trading. In this report, you will receive information and education that will help you develop as a trader. We will also highlight attractive trade setups for the coming week that you can add to your watchlist.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
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7 Replies to “Options 101: Getting Started”
Hey Tim,
Thanks for starting this series! I think it is really going to help my trading. Sometimes I get overwhelmed with all the new strategies and this will help me get back to the basics and solidify my base trading techniques. Have a great Thanksgiving!
HEY MARK, I WAS LIKE THAT A COUPLE OF MONTHS A AGO. I HAVE BEEN THERE, MY ADVICE IS HANG OUT MORE, READ EVERY ARTICLE, WATCH THE VIDEOS OVER AND OVER, GIVE IT SOME TIME AND IT WILL ALL MAKE SENSE. YOU WILL START UNDERSTANDING EVERYTHING. I STARTED 2 MONTHS AGO AND I ALREADY DOING SOME VEGA AND THETA STRATEGIES. ENJOY YOUR JOURNEY AS TRADER TEAM-MATE.
Ali Tahta,
Thanks for those encouraging words. Oh yea I’ve been studying hard and I know I will eventually get it. I’m really enjoying discovering this whole new world of trading. Thanks again and good luck to you too!
Love this article. Would be helpful to have the next article hyperlinked
Great idea Ashish! I’ll try to get them linked together…
Looking forward to this series!
Thank you Tim!
Comments are closed.