I’ve written before about any number of myths that surround options trading: That it’s riskier than trading stocks (it can actually reduce your overall position risk); that it takes a math whiz to do successfully (many fundamental options strategies are relatively simple to both understand and implement); or that it’s reserved for hedge funds and big institutions and isn’t accessible to regular investors (couldn’t be further from the truth, especially in this day and age).
But rather than just debunk more myths, I wanted to offer new options traders some guidance on where to go if they’re intrigued and want to learn more.
While I am a bit biased, I would look to one of the many options services that Cabot offers. That way you get to learn from an expert like myself or Andy Crowder who also runs options trading services. For example …
The most basic of options strategies is the covered call/buy write. The nuts and bolts of this strategy are you own or buy 100 shares of a stock, and then you sell a call option against that stock holding to collect a call premium.
For example, you could buy 100 shares of Apple (AAPL) and sell 1 call for $5 (which is actually $500 that you collect).
A covered call is a very safe strategy and is actually a way to reduce your risk.
I sell covered calls in the Cabot Profit Booster portfolio, where I recommend one such trade every Tuesday morning based on fellow Cabot Analyst Mike Cintolo’s stock recommendations. This portfolio is an ideal introduction to options trading for beginners because it couples Mike’s top-notch research with simple, actionable option trades.
Andy Crowder also sells covered calls in the Cabot Options Institute Income Trader portfolio, where he uses covered calls as part of his Income Wheel portfolio strategy. Andy’s services are highly transparent and trades are placed in a very step-by-step manner, which also makes them good for beginners.
If covered calls aren’t your cup of tea, the next most basic of strategies is buying calls/puts as a way to get bullish or bearish exposure.
The advantage to these strategies is you use the power of options, which is leverage, to get upside or downside market exposure.
For example, instead of buying 100 shares of Microsoft (MSFT) which would cost you $40,000, you could buy one call option that might only cost you $2,000 and get similar profit potential should the stock rally.
At Cabot Options Trader we use call/put buying, as well as execute covered calls. Plus, you get a detailed explanation of why I recommend those trades including the risks/rewards, updates on where we stand with those positions, as well as access to my email if you ever have any questions, and so much more.
Finally, if you are ready to take the next step, and it’s a big step, you can add your name to the waitlist for Jacob’s Private Circle (JPC). This is a super small group of traders executing both basic and sophisticated options trading strategies (iron condors/diagonals/etc.).
Stepping back, in the over ten years I’ve been at Cabot I have seen the options world explode in popularity. This breakthrough in options trading joining the mainstream investing world, along with the countless traders I’ve taken from beginners to intermediate to pro levels has been extremely rewarding.
If you are interested in learning about options trading, now is the time to join the party, and Cabot is a great place to start.
