I have a few questions about options trading

[marine]

good morning

well i just got out from the marine after 12 year of honorable service and deploy twice
anyway i have few questions.

when you trade option how many contract do you normally buy?
do you buy more if the stock go down ?
do you sell you contract if you are losing 10% or more in your trade ?

 

[DB01]

Money management will make or break you in this game. How much you risk and when, is up to your account balance, your trading plan and your risk appetite. What I do, not that it is necessarily correct, is make the risk for each trade the exact same, no matter what the circumstances. Take the emotion out of it. I risk 2% of my total account value on each trade. If the contact I am in loses 50% of its value, I get out. So, I figure out what 2% of my account is, figure out what a 1/2 loss is on the contract is and then buy the number of contracts that could take a 50% loss and be at or under my 2% total account value. Not sure that totally made sense. For example if my account is $10,000, the total I would risk is 2% of that ($200). If the contract I want to get into is going for .50, then I would be willing to stay in until it drops to .25, then I would get out. Each contract is worth 100 shares so you have to multiply the cost by 100 to get what it is actually going to cost you so the cost per contract is $50 and I'd be willing to lose $25 per contract. I've already decided that I'm willing to lose a total of $200 on the trade so at a $25 loss per contract, I'd get into 8 contracts. Just my way.

Semper Fi Marine. Welcome home.

 

[waltj]

Semper Fi,

I was with 3/3 many moons ago

when you trade option how many contract do you normally buy?

This all depends on you personal risk tolerance. If your unfamiliar with options its probably best to paper trade them until you understand them.

do you sell you contract if you are losing 10% or more in your trade ?

Personal risk tolerance.

You buy a contract for a buck.. how much of that dollar are you willing to lose? 10 -20%??? all of it?? those are decision your gonna have to make

Just my opinions

 

[marine]

Semper Fi,

I was with 3/3 many moons ago



This all depends on you personal risk tolerance. If your unfamiliar with options its probably best to paper trade them until you understand them.



Personal risk tolerance.

You buy a contract for a buck.. how much of that dollar are you willing to lose? 10 -20%??? all of it?? those are decision your gonna have to make

Just my opinions

okay thank you for your help and i was with 2nd battalion 25th marine

 

[horserider]

@marine My father was a marine. Fought in the Pacific in WW2. Thanks for your service.
I believe @DB01 gave you a very solid idea of a plan for account management. Remember managing risk is paramount as if you lose it all you are then done trading. The only thing which may skew your risk management would be account size. If you have a small account it becomes harder to meet the say 2% level of total account risk. Simply because it would be difficult to buy any options. ( under $500 account).
No idea of your account size but if smaller there is nothing wrong with buying one contract. Profit may be small but losses are also going to be small. It keeps you in the game.
As you progress then begin buying multiple contracts that fit your risk management and begin to scale out of some contracts as they increase in value. If you can cover the initial price by selling a few the rest can ride free and you can take a higher level of risk on those seeing if you can ride to big profit. I would not recommend the same on a losing position, sell all. You can buy back at a lower price if it turns around.
If you are talking about averaging down in a position going against you I would not do that. Accept you are on the wrong side of the trade and look for another opportunity.

Each person is different as far as how much of a gambler you are. So come up with a plan that is comfortable for you. Unfortunately I tend to be a gambler and bend my rules. Bad habit I am still working on. REMEMBER in gambling the house always wins !!!! Protect your capitol. Stay in the game.

 

[marine]

thank you for the help

 

[farresa]

@marine First, thank you for your service!
Money management that @DB01 was talking about is important but 1st thing to do is learn the terminology. Calls, puts, in the money,at the money, out of the money,strike price, premium. knowing what your looking at and for goes a long way in option trading. There is a wealth of free information on the web about option basics. Then paper trade until you get comfortable looking at an option chain, deciding what strike price option is best for the trade you want to do and how to get into the trade as well as getting out of it. Then use money management along with the above to trade real money. It isn't really as difficult as it sounds just a bit time consuming at the start to get up to speed.

 

[TrueDepth]

Unless you have at least $10,000 to lose and at least 3 years to devote intensive study and learning of the stock market before you start trading and being able to survive off of what you make, I highly suggest you drop this crap, and focus on getting a real job. Some people try trading for 7, 10, 20 years and still may or may not be able to make money on average.

From your question, you have many hundreds/thousands of hours to go.

 

[J007RMC]

Welcome home my friend

 

[BenTen]

Thank you for your service @marine

 

[J007RMC]

Get to know the vwap very important to understand the mean however that comes packaged research, research, research, you've found the best site on the web here for the journey.

 

[J007RMC]

Marine I traded stocks for years always had a desire to trade options but wanted to learn the right way to trade options so I joined an options trading group and it literally turned my life around. I will always be a member of the group if interested contact Steve with optionsplayers.com. Its a great group of options traders. GL my friend I left the army 1974 and my son was a marine.

 

[tjlizwelicha]

I hope this isn't a dumb question Lol. Is there an indicator that shows or suggest how far in advance to purchase? Maybe based on another indicator?

I'm just trying to learn.

 

[Slippage]

I hope this isn't a dumb question Lol. Is there an indicator that shows or suggest how far in advance to purchase? Maybe based on another indicator?

I'm just trying to learn.

Do you mean something that will tell you which expiration to choose? It's not so much an indicator thing as a strategy/style thing. If you're day trading then you can buy the soonest expiration because you're sure to sell it before then anyway. For swing trades you expect to hold for days to weeks I've heard of "at least 45 days" being recommended. Some traders prefer longer than that. The advice I've heard from a trader with 35 years experience is "give yourself the gift of time", meaning err on the side of longer than you might need.

 

[tjlizwelicha]

Do you mean something that will tell you which expiration to choose? It's not so much an indicator thing as a strategy/style thing. If you're day trading then you can buy the soonest expiration because you're sure to sell it before then anyway. For swing trades you expect to hold for days to weeks I've heard of "at least 45 days" being recommended. Some traders prefer longer than that. The advice I've heard from a trader with 35 years experience is "give yourself the gift of time", meaning err on the side of longer than you might need.

@Slippage Thats what I was looking for, thanks I am trying to get an ideal of how far out different traders purchase option contracts. That helps a lot. Thanks again.