Guide to Practicing Options Trading

Jul 5, 2024

Guide to Practicing Options Trading

Introduction

  • Aim: Learn how to practice and improve at trading options.
  • Not covered: Basics of options (calls, puts, contracts) but links to resources provided.

Steps to Practice Trading Options

Using Robinhood

  1. Open Robinhood.
  2. Select a contract you wish to trade.
  3. Open contract information by clicking the middle part of the contract.
  4. Click 'Add to Watchlist'.
    • Enables paper trading (simulated trading without using actual money).

Importance of Paper Trading

  • Acts as a simulation to see potential gains or losses without financial risk.
  • Beginners often hesitate due to the volatility of options.

Analyzing Contracts

  • When purchasing a contract, consider the following:
    • Cost (e.g., $299 for a call contract).
    • Daily return and total return.
    • Breakeven price.
    • Current profit or loss.
  • Helps in practicing and experimenting with trades.

Tools and Strategies

Using Charting Software

  • Recommendation: TradingView
    • Free, available on both desktop and mobile apps.
    • Alternative: Use Robinhood’s charting features.
  • Buying Strategy
    • Buy low, sell high.
    • Avoid purchasing contracts when the stock is at its peak value.
    • Buying at the peak increases the risk of sharp declines in contract value.

Practicing On TradingView

  1. Follow a stock (e.g., QQQ) during a trading session.
  2. Monitor for buy opportunities.
  3. Open the corresponding contract on Robinhood.
  4. Add the contract to your watchlist.
    • Monitor gains or losses from the moment it's added.

Option Calculators

  • Use option calculators to predict gains and losses.
    • Visual diagrams for potential financial outcomes.
    • Helps map out potential risks and rewards before jumping into a trade.

Additional Resources

  • Links to TradingView, option calculators, and basic option trading videos will be provided in the description.

Final Tips

  • Know your risks and rewards thoroughly before trading.
  • Continuous learning and practicing are crucial.

Conclusion

  • Thanks to viewers and subscribers.
  • Encouragement to subscribe for more insights on trading options.
  • Aim: Help viewers achieve successful trading sessions and goals.

Call-to-Action

  • Subscribe to the channel for more trading tips and strategies.
  • Check the description for additional resources.