Lecture Notes: Options Trading 101

Introduction

• Discussion on options trading basics
• Stock market overview: Companies publicly traded
• Difference between buying stocks (long-term portfolio) and actively trading (expiration involved)

Active Trading vs. Buying Stocks

• Buying Stocks: Hold indefinitely, profit only when the stock price increases
• Active Trading: Involves an expiration, potential for quicker returns
• Options trading allows profit whether the market goes up or down

Stock Market Hours

• Open from 8:30 a.m. to 3 p.m. Central Time
• Volatile trading times: First hour of market opening preferred
• Strategy: Quick trades, e.g., in and out within 5 minutes

Time Investment in Trading

• Learning takes time (1 month to 6 months depending on diligence)
• Actual trading does not consume a lot of time once learned

What are We Trading?

• Trading contracts, not actual shares
• Contracts allow buying/selling equivalent of 100 shares
• Contracts have expirations (daily, weekly, monthly)
• Types of Trades:
  • Call: Bet stock will go up
  • Put: Bet stock will go down

Choosing Expiration Dates

• Day trading: Nearest expiration date is fine
• Swing trading: Choose expiration based on how long you plan to hold

Picking the Right Contract

• No "correct" contract; choose based on account size
• Types of Contracts:
  • At the Money
  • Out the Money
  • In the Money

Trading Platforms and Brokers

• Need a broker account (e.g., Schwab, Weeble, Interactive Brokers)
• Apply for a tier two cash account to avoid restrictions like PDT

Trading Tools

• Trading View: Essential for chart analysis
• Suggestion: Chart on one device, trade on another

Strategy and Risk Management

• Strategies vary, important to learn chart analysis
• Risk Management: Use a percentage of your account for controlled risk

Financial Goals and Expectations

• Realistic expectations: Compounding gains over time, not overnight riches
• Education and consistency are key

Tax Considerations

• Taxes to be discussed, involves providing a 1099 form to a CPA

Additional Learning Resources

• Join mentorship or membership programs for further learning and support
• Importance of having a trading plan and continuous education

Conclusion

• Trading is about education, discipline, and strategy
• Always keep learning and adapting strategies for success