| <!-- @page { margin: 0.79in } P { margin-bottom: | | | | to learn the myriad of ways they can boost your |
| 0.08in } --> | | | | bottom line is the easiest way to discover what |
| A lot of people get nervous once you start talking | | | | works for you. |
| about options. After all, they're not your standard | | | | These are the six strategies that drove my father to |
| investment. You really have to read between the | | | | success… and they've led to fantastic wins for my |
| lines and have a keen eye for short-term trends… | | | | Options Hotline readers over the years. Now, |
| Sometimes, those trends only last for a few hours. | | | | hopefully they'll help spur your success, too. |
| But, with all that said, with keen investing sense and | | | | Of course, these are not the only, ahem, options you |
| the right preparation you could make some very nice | | | | have for being successful in trading options. There |
| gains on the open options market. | | | | are some devices you can use to get ahead of other |
| Through my own experience, both as a trader and | | | | investors…very far if you're smart and plan ahead. |
| from learning from my father, I've discovered some | | | | The Internet is certainly a good device to use in |
| powerful secrets that could help you in becoming the | | | | trading your options. The World Wide Web allows us |
| best options investor you can be… | | | | to see, in real time, how our investments are doing, |
| Maximize Your Options Gains with These Six Trading | | | | both good and bad. We can also use it to get out of |
| Secrets | | | | investments that are no longer helpful to our |
| At first glance, it may seem like speculating with | | | | strategy…and find ones that are. |
| options is a risky business. After all, price swings of | | | | We have a name for this online strategy: "Virtual |
| 30% in an hour are far from comfortable for most | | | | trading." |
| investors. But with risk comes reward — and | | | | Perfect Your Options Trades for Free with "Virtual |
| when you can manage that risk successfully, the | | | | Trading" |
| rewards far outweigh the risks over time. That's | | | | Technology has made significant strides at flattening |
| where these six trading secrets come in… | | | | out the learning curve for investing in options. Now, |
| They're the tools I've turned to for decades to | | | | one free online tool can help you perfect your |
| maximize my gains as an options investor while | | | | options trades in real time without risking a single |
| keeping my risks tolerable. My Options Hotline readers | | | | cent. Here's everything you need to know to gain |
| have used these rules to maximize their options gains | | | | options experience without the risk… |
| over the years too, and now, I'm passing them on to | | | | I firmly believe it is my job to be as blunt about that |
| you… | | | | as possible. The potential rewards of options are |
| Speculators get a bad rap. The very word conjures | | | | very tempting, and anyone who forgets about the |
| up pictures of some carefree playboy throwing | | | | potential downsides is toast. |
| money into any crazy investment — not really | | | | Unfortunately, those stark warnings also scare away |
| caring if they win or lose. | | | | people who could benefit from options. People who |
| It's not a flattering picture. And that's why | | | | have built solid portfolios… and can easily afford to |
| conservative investors shy away from anything | | | | speculate a bit. They're the complete opposite of |
| "speculative" — lest they be called speculators, | | | | traders who blindly rush in focused on the gains. |
| too. | | | | Instead, they only see the potential losses… |
| Well, I'm here to tell you "speculating" isn't a dirty | | | | That's why I offer a simple suggestion — try |
| word. You can be a conservative investor and still | | | | options trading for yourself. With just a few minutes |
| enjoy that chance at phenomenal profits that | | | | a day, you can learn how profitable options can be, |
| speculating can bring. | | | | without risking a single cent. |
| I learned that lesson from my father, Paul Sarnoff. | | | | In the old days — as little as a decade ago — |
| He was one of the first people to offer an options | | | | the best way to do this was by paper trading. As |
| course — introducing novice investors to the | | | | the name suggests, it doesn't involve any real |
| concept of Superleverage (more on that on Friday). | | | | money… or even a broker. Instead, you simply |
| But he also had a strong conservative streak. In fact, | | | | chose an option and kept track of it each day. With |
| he was an avid fan of precious metals, advocating | | | | a few simple calculations, you could see how you |
| that they should be at the core of every solid | | | | would have done if you actually made the trade. |
| investment portfolio. He even wrote books on gold | | | | There are still plenty of good things to say about |
| and silver investing. | | | | paper trading. For one thing, it forces you to work |
| My father proved that even cautious investors can | | | | — tracking down prices and calculating potential |
| benefit from speculating. But as he always stressed | | | | profits. If you're going to put that much time into an |
| — and as I still stress today — the key to | | | | activity, you might be more inspired to do well. It's a |
| being successful was to have a complete plan of | | | | good trait to have if you ever decide to trade for |
| action. You never, ever throw your money around | | | | real. |
| casually… even if it is money you can afford to | | | | "Virtual Trading" Is the Road to Real Profits |
| lose. And you must take steps to make sure you | | | | Still, the pen-and-paper method is a little outdated |
| never get in over your head. | | | | now. Today, lots of websites offer "virtual trading" |
| Of course, that's easier said than done. That's why | | | | — free computer programs that let you practice |
| my father developed six simple strategies for | | | | trading without putting any money at stake. Most |
| keeping a level head when speculating. They may | | | | require you set up an account… not an actual |
| sound common sense, but I've spent enough time in | | | | brokerage account, but a membership account — |
| the markets to know that common sense isn't that | | | | containing basic information like your age and |
| common when money is involved. | | | | interests. |
| So, if you're thinking of dipping your toe into the | | | | When you sign up, you'll get a username and |
| speculative markets, here are a few proven ideas to | | | | password to get to your account. You'll also get a |
| keep in mind: | | | | small sum of virtual money to start trading with. |
| 1. Create a sound money-management strategy. | | | | (Beware of a site that offers to give you more fake |
| This one flies in the face of the conventional image | | | | money in exchange for real money. The point is to |
| of a speculator. But believe me, all consistently | | | | avoid spending ANY out-of-pocket cash.) |
| successful speculators start with a plan. It doesn't | | | | I must be honest, I haven't signed up for many |
| have to be anything too involved — just make | | | | virtual trading accounts — so I can't honestly |
| sure you're clear on your objectives, and set some | | | | compare and contrast them all for you. However, a |
| guidelines for yourself. Figure out your entry and exit | | | | colleague recently opened up a mock account on the |
| strategy for each play, starting with how much to | | | | Chicago Board Options Exchange (offered by Options |
| invest, how many open positions you plan to have, | | | | Monster)… so I can tell you all about that. |
| how you will monitor positions, what kind of | | | | The CBOE virtual trading site starts you off with |
| stop-losses you will use to preserve capital, etc. | | | | virtual money that you can use to simulate trading |
| A sound money management strategy is the most | | | | any of the securities the CBOE tracks — from |
| important factor in successful speculation and it | | | | stocks to options, even some futures. |
| allows you to stay in the game. | | | | The Web site does its best to make the trading as |
| 2. Know your broker and monitor your investment. | | | | realistic as possible. Price quotes are based on the |
| When choosing a broker make sure to ask as many | | | | actual prices seen on the exchange. When you wish |
| questions as necessary and that you get the | | | | to buy something for your virtual account, you are |
| appropriate answers before simply giving over your | | | | given the same kind of choices that you'd face if you |
| money. If you are a beginner, find out about the | | | | were actually buying a real security. |
| broker's history and references, and speak to them | | | | You can dictate limit and stop orders. You can make |
| frequently to establish a relationship. Make sure that | | | | day orders or standing "good to cancelled" orders. |
| either you or your broker will be constantly | | | | You can even choose to write options or use |
| monitoring your investment — today's markets | | | | covered calls. |
| are very volatile and with options the price can shoot | | | | After you make your virtual order, the software |
| up 30% or more in just a few hours… so it is | | | | does the rest. If you placed a market order, the |
| necessary that your broker is able to see the option | | | | security is added to your virtual portfolio. If you used |
| is performing and be able to execute an order in a | | | | a limit order, the program won't place your order until |
| timely manner, to ensure that your capital is | | | | the real market hits your limit price. |
| protected. | | | | Everything you need to know is spelled out for you |
| With so many discount Internet brokers out there, it | | | | — the program even levies a virtual commission |
| seems like more and more people aren't doing their | | | | charge on each of your trades. |
| homework before opening an account. It's OK to try | | | | After that, it's just a matter of logging in to see how |
| and go it alone… unless you don't know what | | | | you're doing. You can also set sell orders, even trailing |
| you're doing. In that case, it's well worth the time and | | | | stops. |
| money to explore more experienced flesh-and-blood | | | | Programs like this can be a very useful tool for |
| brokers. | | | | gauging how well you'd do in the options market |
| And if you want a hand in selecting a broker, make | | | | — making any lingering fears disappear. |
| sure you check out the Penny Sleuth's Discount | | | | Of course, there are some important differences |
| Broker Guide… | | | | between real investing and virtual investing that you |
| 3. Stick with your exit strategy if a trade goes | | | | need to keep in mind. |
| against you. | | | | It's a lot easier to trade when you're not spending |
| With a good money-management plan, there should | | | | real money. But virtual trading is so lifelike, you might |
| never be any surprises. No matter what price your | | | | actually lose sight of that when you really start |
| trade is at, the action you need to take should be | | | | trading. This is especially true since actual trading will |
| clear. | | | | involve money you can afford to lose. If you're not |
| That doesn't mean you have to be inflexible, | | | | careful, it will all seem like a game… and in games, |
| however. Just because an option has met your profit | | | | taking unnecessary risks is part of the fun. |
| target, you don't have to automatically sell. But there | | | | The solution is to treat your virtual account as actual |
| has to be a compelling reason to stick with the trade | | | | money. Don't make crazy trades just because you |
| — something more than a feeling that the trade | | | | can. Instead, only make trades you'd make in real life. |
| will continue climbing above your target price. (After | | | | It's not only the best way to get a feel for how |
| all, you selected that target price for a reason.) And | | | | you'd actual do with options, but it's also the easiest |
| always use a stop-loss or a trailing stop order to | | | | way to transition from virtual trading to real trading. |
| make sure you're ready for any reversal that might | | | | Once you see how much money you're missing out |
| pop up. | | | | on by not using real money, it won't be long before |
| For a losing trade, however, you need to be a little | | | | you'll want to try your hand at actually trading |
| more harsh. Options are wasting instruments, and | | | | options. |
| their value dies a little each day. Sometimes it's | | | | Picking the Right Virtual Trading Platform |
| better to stick to your strategy and settle for a loss | | | | Here's a rundown of several of the free virtual |
| than it is to wait it out and hope for a miracle. That's | | | | options trading platforms you can sign-up for right |
| money you could be plugging into another play. | | | | now…paperTRADE |
| 4. Always, always, always, ask questions. | | | | This full-featured trading platform from |
| The Internet age is creating a generation of | | | | tradeMONSTER offers newbie options investors the |
| independent investors. But some are still too proud to | | | | chance to experience options trading on a realistic |
| admit that there are things they don't know. In the | | | | trading platform. |
| speculation game, what you don't know can hurt you. | | | | CBOE Virtual Trade Tool |
| If you've taken my advice about finding a good | | | | While not as robust as other trading platforms, this |
| broker, you've already got a ready source of info to | | | | simple options trading tool still gets the job done |
| turn to. Dozens of Web sites also offer complete | | | | without the advanced tools that some beginnings |
| details on options trading. So there's just no excuse | | | | may find confusing or unnecessary. |
| for ignorance any more… and losing money because | | | | Trade Smarter Options |
| of ignorance makes even less sense. | | | | This innovative binary options platform isn't as realistic |
| 5. Learn from your mistakes. | | | | as the other offerings, but this website shines by |
| Find out what works for you. There will be losers | | | | simplifying the options investing process to limited |
| along the way — but just make sure you know | | | | outcomes. If you're having trouble grasping options |
| what you did wrong in previous trades (e.g. you set | | | | concepts, this site may be a good intermediary step |
| a stop loss of 15% and were stopped out too early | | | | for you. |
| and the option rebounded to 56% profits). Take | | | | PaperMoneythinkorswim's virtual trading system is |
| every trade as a lesson and use it to improve as you | | | | simply their award winning real-time trading platform |
| continue trading. | | | | with virtual money. This system offers investors the |
| 6. Remember that knowledge is power. | | | | advanced features you'd expect from a real options |
| You can never know too much… strive to learn as | | | | broker. |
| much as you can about options and their inner | | | | Not So Scary, Is It? |
| workings, strategies, fundamentals, everything… so | | | | Trading options isn't all that scary now, is it? Using |
| that you will be better equipped to profit with | | | | virtual trading in combination with the six secrets I |
| options trading. | | | | learned from my father, you could show yourself |
| As I've said in the past, options trading is more | | | | very brave in the world of trading. Just be smart, be |
| accessible than ever before. And the profit potential | | | | observant and then you could be profitable. |
| hasn't diminished a single cent. Going out of your way | | | | |