How to trade stock options

[kv968]

However, they take on trades where they have the potential to wipe out the account. This could be something like going on 4X margin (been there, done that, got the margin call ) or buying naked options.

Options have the ability to make you a ton of money, but a non-zero chance to wipe you out. And that is why I avoid them.

Sorry for the verbose post.

g

Great post. Although let me just say BUYING naked options isn't like going on margin since you're not obligated to do anything. The most you risk to lose is whatever you paid for the option. SELLING a option naked or not being hedged could cause you a REAL world of hurt.

I personally just dabble in options here and there and not quite into the "multi-legged" contract type stuff. Mostly just directional stuff which would probably be better if I did spreads more often instead.

You're right though, options do have a chance to make you a whole lot of money but also a real good chance of wiping you out too if not done properly. Even if done properly sometimes for that matter.

As far as talking about trading, I really don't to non-traders. A lot of people at work ask me what I think is a good buy every now and then just because I'm one of the only people they know who do it, but my response to them is basically, "I don't know, just buy low and sell high".

[gambler2075]

Of course selling (naked) options is a world away from buying options. I would say that selling options is like buying options on TZA or any of the triply leveraged ETF's

But my friend has serious risk management issues because he went ALL IN while buying his aapl calls.
Now I am just waiting for when he texts me "I'm starting over... changed my paycheck to direct deposit on Etrade"... which is coming. The only question about when he blows his portfolio up (again) is the timing. If I could buy some puts on his portfolio balance I would

g

[KTP]

Guys, we are talking about an option trade (CMG) worth 0.13% of my portfolio, so it isn't going to kill me to have the spread collapse

Options are about the only way I know to short a stock and take on a defined amount of risk, so if you want to go short, you need options. The question then becomes how far out do you short? I picked poorly. I really think this stock (CMG) is going to do a Krispy Kreme soon, but when? Could be another year or two. I played earnings and lost. I bought BAC at $5.20 when everyone was running scared...I won there (BAC friday was over $8).

Salesforce (CRM) is another stock that I think is going to tank, and it could happen after earnings this Feb 22. I will not be shorting it though because my CMG experiment has shown me the market is acting too bullish right now.

[ukgaz]

Guys, we are talking about an option trade (CMG) worth 0.13% of my portfolio, so it isn't going to kill me to have the spread collapse

Options are about the only way I know to short a stock and take on a defined amount of risk, so if you want to go short, you need options. The question then becomes how far out do you short? I picked poorly. I really think this stock (CMG) is going to do a Krispy Kreme soon, but when? Could be another year or two. I played earnings and lost. I bought BAC at $5.20 when everyone was running scared...I won there (BAC friday was over $8).

Salesforce (CRM) is another stock that I think is going to tank, and it could happen after earnings this Feb 22. I will not be shorting it though because my CMG experiment has shown me the market is acting too bullish right now.

I brought BAC just after you at $5.28 with a covered call (strike price $7.50)

[Mr Nice Guy]

If I could buy some puts on his portfolio balance I would

LMAO!!!