Learn Stock Options Trading for Beginners

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Learning How to Trade Options

If you are new to trading options and want to learn more, you’ve found the right place.  In my research on trading, I have discovered little online supports for new traders. Yes, there are resources and  lessons online for options strategies and interpreting indicators but not enough plain talk for beginners.

We remain beginners for quite a while and that’s all right.  It can be difficult to keep up with talk from veteran traders and they can be hard to understand. They’ve been around the block quite a few times and are experts at trading. They’re not going to stop so that we can catch up.

We will catch up, though.  With time, patience, practice and perseverance beginners can learn to trade stock options wisely and with caution.

My introduction to stock options occurred at the Rich Dad, Poor Dad Stock Options Seminar.  Here are the first lessons learned at that seminar:

Lesson #1: What attracted me to options trading was exactly what too few people know: When you buy stocks, you only make money when your stock goes up (yes, I know you know that). But options traders are making money when stocks go down too. The icing on the cake is: stocks go down faster than they go up. Options trading is the little secret easily kept from those of us allergic to financial complexities.

Lesson #2: Stock Options are just what they sound like. You are purchasing the “option” to buy or sell stocks at a specific price and within a specific period of time.  How that is done is not so simple.

Lesson #3: There are always opportunities. New opportunities occur all the time with options.  Never think you have missed your one and only opportunity, or jump on a trade without thinking it through because it might slip away. There is always another one.


  1. Learn the trade. If you’re serious about trading you will be learning constantly hereafter. Know the markets. Know the terminology. Know the difference between NASDAQ and the S& P 500, call options and put options.  Before learning options terms, understand general financial instruments, exchanges, the basics, i.e., NASDAQ, S & P 500, stocks, etc., visit Investopedia’s Stocks Basics.  Investopedia is an excellent resource and is mentioned on this website often.  After obtaining a good grasp of the basics and if you’re serious about trading options, The Options Industry Council (OIC) is a nonprofit whose only goal is to make better traders. You will find that both Investopedia and The Options Industry Council will be two of your best resources and they are free.
  2. Learn the technical tools. Leave no stone unturned in understanding every aspect of options trading.  Not doing so will cost you money.  Get help for what you don’t understand.
  3. Be patient. You are a beginner. Learning takes time and there is much to learn about trading options. Your money depends on your knowledge.
  4. Make sure you are aware of your tax responsibilities before you embark in trading. See How to Set Up Your Own Trading Business on setting up your trading as a business.
  5. Do not trade with your emotions.
  6. Practice. There are many virtual trading platforms available. I use FreeStockCharts.com.  It’s easy to use and has the most technicals for free that I have found.
  7. Find a mentor. Having a mentor is not necessarily having an experienced trader by you side and they don’t have to cost anything. Most brokerage houses offer some type of assistance either through chat or telephone. Don’t underestimate the value of mentoring through technology. Make it a pre-requisite in choosing your broker.
  8. Share your experiences with others here on our Virtual Trading blog. The blog is where you can “speak” the new language you are learning with others like yourself.  Some people just don’t understand what we’re talking about.

The J.P. Morgan Chase $2 billion debacle of 2012 was a trade, a single trade. Conversely, in 1993 Warren Buffett made $7. 5 million dollars on a trade, one trade.  In the case of J.P. Morgan Chase, their loss was several traders’ gain. In the case of Warren Buffett, his gain was probably several traders’ loss.

Options trading is complex and can be an intimidating process for the beginner. Here you will find resources for starting you trading career.  There are many resources on the internet to help you acquire the confidence you will need to succeed in trading and many of those listed here are free.

With the internet, what you once had to do on Wall Street can now be done in your living room. Quite a few have utilized these instruments and made fortunes and now there is nothing stopping anyone from trading options. If you can handle it and have a minimum investment, I have found no other online resource for making money that compares to stock options trading but you have to learn it. You should know the system as well as possible before trading real money.

Get professional training whenever you can.  Options trading is complex. See our review on Rich Dad, Poor Dad Stock Success 3-Day Training Seminar.

Set short term and long term reasonable goals.

Most of all, enjoy the excitement of this new endeavor and make money.



There are several online brokerage houses to choose from.  One does not necessarily fit all.  I suggest doing a few virtual trades before deciding on which brokerage house to use. Most assume a certain level of competence but offer varying degrees of help.

Help can be online chats or by phone.   Two suggested here are:


A powerhouse brokerage firm. Unlimited day trades with cash account. Platform can be overwhelming at first since they have everything at your disposal. Virtual trading platform excellent for “getting your feet wet” before trading with real money.


Trade for $.39/100 shares. Unlimited shares, fast executions, competitive prices & powerful tools.

Trade Commission Free for 30 Days at tradeMONSTER!* See Why Thousands of Traders are Making the Switch.

For information on how brokers handle you trade orders, the U.S Securities and Exchange Commission give a simple breakdown on what happens to your options order after you hit, “enter.”

Almost every site that discusses options trading prints a disclaimer on their site. I will do likewise:

***Trading options is not for everyone. Trading options can result in loss as well as gain.  This site is for informational purposes only.  We all trade at our own risk. ***

14 comments for “Learn Stock Options Trading for Beginners

  1. Tracey Khan
    May 26, 2012 at 1:47 pm

    Two weeks after first options trading seminar joint trade with my son made $35 on a $118 trade. Problem is, didn’t know how we did it. Another problem was how to get out at the right time. Wasn’t so much as a strategy problem (though we weren’t sure of how the strategy worked) but more of a “how to make the order” and how technically to end the day trade. Will talk to our mentors and let you know what went wrong. In the meantime, the trade is still active so hopefully, we will get make money on this trade still.

  2. umi
    June 8, 2012 at 1:19 pm

    Undecided on which way the market is headed. Its been on a down trend over the past month or two, but seems to be gaining some ground. My account value on options house is down about 2.5%. Hopefully that should change for the better. I still have three open transactions. Did great last week betting against the nasdaq. I bought a put option and double my investment in about 4 days before closing my positon, but lost some cash going long with the financial sector. I closed my long position (financial sector) just in time because the financial sector led the rally the next day. Its been interesting and fun so far

  3. admin
    June 9, 2012 at 12:16 am

    Must be doing something right. Almost forgot a trade this morning. It was in the red yesterday and I was regretting buying the option. This morning made 45% profit on a virtual (play money trade). Need more practice, lots more, but can’t wait to trade with real money.

  4. umi
    June 15, 2012 at 2:29 pm

    learning the greeks. It seems complicated but as you read it becomes easy to understand. A pretty good site to learn from is http://www.optionsplaybook.com/

  5. umi
    August 16, 2012 at 2:43 am

    purchased call options on homedepot and walmart today. Home depot did well. The housing market has been showing some good signs over the last month. I bought walmart call options just ahead of its earnings report tomorrow. Lets see how they report and how the stock reacts to the news. Retail reported some good news over the past week. Facebooks and interesting stock to watch tomorrow. Insiders can finally sell there shares that they purchased when the stock went public. Lets see if they run for safety or if they still believe in the company. Facebook closed at $21.20 down a about 45% from its $38.00 ipo. Lets see tomorrow

  6. umi
    August 16, 2012 at 11:11 pm

    Been doing great with home depot. Didn’t do too well with Wal-Mart. Earnings reports weren’t the greatest. Stock Dropped three percent today. Haven’t put in an exit strategy yet. Also lost money on facebook. Tried to get in before the insiders dumped there shares. But the Market reacted too quickly for me.

  7. umi
    August 16, 2012 at 11:13 pm

    I need to come up with a proven trading strategy. I’m going off emotions a nd hunches right now. Not the best idea

    • admin
      August 17, 2012 at 1:23 am

      My strategies was working but I keeping abandoning it,hence, losing money. And I am a perfect example of trading with emotions. Made money with my emotions toward ebay. Lost money that way too.

  8. umi
    April 22, 2013 at 2:25 am

    Had a good month trading options. I actually did two ‘bear call spreads’. One on Facebook and one on Bestbuy.

    For facebook I “sold to open” a $27call (10 contracts), while at the same time “buying to open” a $29call (10 contracts) which gave me a credit of .56 per option ($560.00 credit).

    For Bestbuy I “sold to open” a 25call and “bought to open” a 26call which gave me a spread of .36 ($360.00 credit). The contracts I sold were both “in the money” and both stocks dropped and took a bit of a dive by the time the contracts expired. My profit less commision was $877.21.

    ***That was a gain of 19.89% of my cash balance in 2 weeks.I purchased the options on April 5, and they expired on April 19.

    Not bad for a little research and few clicks of a button

  9. umi
    April 22, 2013 at 2:29 am

    Paying close attention to the S&P 500. Its supppose to be forming a ‘head and shoulders’ pattern which is sign for decline. I’m thinking of what stock in what industry would have the highest probability of declining in next 30 days.

    Any ideas?

  10. umi
    April 29, 2013 at 12:00 am

    just did a bull put spread on Qualcocomm. According to reports there’s a bit of optimism on the stock for the short term. Its not too positive for the long term. Call options almost double puts as far as open interest is concerned. Since I like to get paid right away I figured I’d sell a put option and buy one with a lower strike to hedge my losses in case the stock moves in a downward direction in the next three weeks. We’ll see how it goes.

  11. umi
    May 19, 2013 at 7:35 pm

    Had a bad but good month of trading.
    I did a short condor on microsoft’s may options, hoping it would trade sideways and lost $0.50 cents. I did a short condor on facebook’s may options expecting it to trade sideways and lost $214.50.. I did a bull put spread on yahoo and gained $274.50.
    My biggest mistake was on directv. I did a short condor expecting it to move side ways without realizing there earnings report was being released the next day. They beat expectations and the stock jumped through the roof. I never tried to close my position and loss $1099.50 including commissions. If I would have checked the earnings report I wouldn’t have made the trade until the next day.

    So to sum it up I lossed $1040.00 when I should have gained $59.50

  12. umi
    May 19, 2013 at 7:41 pm

    By the way I traded three of these stocks sideways.
    We’re currently in a bull market with record highs.
    All four stocks were up in price trending with the market.
    The trend is your friend
    The three that I traded sideways lost money.
    The one trade I was bullish I made money.

    Another lesson learned
    All with virtual cash

  13. June 11, 2013 at 10:45 am

    Hi Umi,
    Options Trading for beginners is concerned with the basics, the fundamentals of a strong foundation in learning the stock options trade. The maximum profit and loss is not always the same. Sometimes people start trading with the wrong expectations, thinking that they will make millions in days and sometimes traders go through a ‘drawndown” period before things picks up. Hence, every trader/investors should know the basics and investment strategies. More useful tips, investment report and useful option strategies can be found here http://australianinvestmenteducation.com.au/products/options-made-easy-options-strategy/

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