Learning how to trade options can open up a world of new opportunities for you that can lead to wealth as well as the ability to be your own boss. An options trader is a professional that derives a good portion of their income buying and selling options, which is another investment commodity that are bought and sold on a regular basis much like stocks are. While buying and selling options has some similarities to buying and selling stock, there are also a lot of differences that you need to be aware of.
In fact the differences are significant enough that many people experienced in the stock market struggle to find success as an options trader. This is primarily because they make the mistake of assuming that their experience as in the stock market will directly translate over to their new goal of becoming an options trader. There are a lot of benefits to becoming an options trader, and once you see all of them you will probably have a better understanding of the immense opportunities that this career path offers.
The biggest benefit of course is money, and highly successful options traders can bring in an annual income that most of us couldn’t begin to fathom. While the pay is excellent, there are other benefits as well. Do you like having to go to work each day and listen to yours boss? If you do then you are in the minority.
Most people will tell you that the idea of working from home and being their own boss is right at the top of their list when mentioning things that they wish they could do. As an options trader you are your own boss, but that comes with the expectation that you are going to be able to act responsibly and put in the hours it takes to succeed.
What Are Options?
If you want to become an options trader the obvious starting point is to learn exactly what options are. The first thing you need to know is that options are broken down into two categories, call and put options. A simplified explanation is that a call option gives someone the right to make a purchase of a commodity at a fixed price during a certain time frame.
This is done when someone feels that investing into a commodity may be profitable under the right circumstances. In exchange for securing the right to purchase this commodity at a fixed price the investor will pay the owner of the commodity a fee or down payment which is called a premium. The premium remains an asset for the commodity owner regardless of whether or not the investor decides to exercise their right to buy.
Why do investors pay a premium and invest in a call option? They do it because it allows them to lock in a price on a commodity without having to fully invest their money into it. This is usually done when there is an indication that a commodity will go up in value, but that indication isn’t strong enough to make an investor feel safe putting a lot of money into it.
So they purchase an option and pay a fee which is a small fraction of what it would cost them to buy the commodity outright. This way they lock in their right to buy a at the current price regardless of whether or not the market value for the commodity goes up. Should things not turn out the way they hoped the investor walks away taking a small financial hit instead of one that could potentially be very damaging to them.
Why do commodity holders work with options? They do it for the money. A commodity owner can always hope that their investment will go up in value, but there is no guarantee that it will. So they accept a premium from an investor that allows the investor to lock in the price of the commodity.
The commodity holder then makes a profit in the form of the premium, this helps to insulate them from the problems that would arise should the value of what they own go down. If this does happen they lose value on their property, but they have gained money from the premium.
If the investor who paid the premium decides to execute their option because the commodity value went up, then the premium remains profit and helps to cover some of what they will lose out on since they will be selling below market value.
What is a put option? A put option can best be described as a type of insurance policy for a holder of a commodity. Basically it allows them to lock in a price that they can sell their property at no matter what the actual value of that property currently is.
For example if an investor purchases a put option because they have concerns that the market value may drop on property they own, then if it does drop they can execute this put option which gives them the right to sell their commodity above market value at the price that was previously agreed upon.
Once again this comes with a cost, the premium, which is the cost of paying for protection that the investor incurs. While adding cost to a business deal is never ideal, in man cases this cost is well worth it because the potential losses can be crippling.
How Trading Options Works
Like just about everything else of value, options can be bought and sold by investors. In many cases the owner of an option will decide that they are no longer interested in what their option covers, so they will decide to sell it. Anyone who chooses to buy an option will generally believe that what made the option so attractive in the first place is still relevant.
For people that decide to sell an option they usually do so for one of two reasons. First, they are convinced that selling it now represents the high point of the option when it will give them the most profit. The other reason is because the option is losing value, in which case an investor may decide to sell it off and minimize their losses.
Trading options offers a lot of opportunity, but much like investing in stocks there is risk involved. But if you can develop the right system you can have success as an options trader.
The Key To Success Is To Find The Right Options Analysis Software
One thing you need to be aware of if you want to start a career as an options trader is that it is very complex and is often confusing. It requires the ability the analyze massive amounts of data in order to make the right decisions when buying and selling options. Even if you do have the ability to analyze all of this data there are still no guarantees.
But does that mean you shouldn’t even bother with trying to cover all of this data. No, in fact trading options blindly without the ability to go over and analyze the massive amount of data involved is a huge mistake that will almost certainly cost you a lot of money.
So there’s good news and bad news about becoming a successful options trader. First the bad news, you can’t possibly hope to be able to analyze all of the data that is needed in order to make fully informed decisions about options trading. Even big companies can’t process that kind of information quickly and efficiently enough to use it.
That’s whey they don’t even try to do it, and why you shouldn’t try either. Options trading software can make a huge difference and help you to minimize your losses while also maximizing your gains.
Now before you go out and invest your money into options trading software, and it is an investment since it will provide you a tool to improve your bottom line, take the time to learn about what you should expect from the software of your choice. First of all not all options analysis software is created equally, some are better than others.
Second of all even the highest rated options analysis software shouldn’t claim that they have a software system that will work for anybody. Instead you should look for options trading software that offers different plans for different needs and budgets.
Arbitrage Is The Perfect Solution For Options Traders
If you are looking for software trading software that checks all of the boxes mentioned above, then Arbitrage is exactly what you have been looking for. It offers plans that start out at $100 a month and top out at $1,000 a month. That means that they cater to the novice options trader as well as to highly experienced professionals.
Want software that will provide you a detailed analysis so that you can make the best decisions? Arbitrage does that as well. The bottom line is that this is a piece of software that is powerful, easy to use, and offers price points that fit nearly any budget.