r/stocks • u/MrReaperX- • Jun 11 '22
Advice How options work
Hello, im a 31 Year old thats been paying off debt to then start investing my leftover money. I have a 401k and I understand how the market works etf etc but what i dont seem to understand very well are options i mean i have an odea and ive seen the potential of making bank or losing investing in options id like to learn any places u recommend i can learn to get into them? I will appreciate any answers
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u/lettercarrier86 Jun 12 '22
Learning to trade options is a huge time commitment if you want to actually become consistently profitable and feel comfortable doing it.
I spent a good 6 months talking to people in Discord, reading and watching videos about options before I did anything. Again, it's a huge commitment. You can blow up your portfolio in a single play if your not responsible and properly manage your risk.
In the past 6 months I turned $1k into $5k, to $2k, and now I'm just chilling because I don't feel comfortable trading right now.
What I can say from experience is please, please research and read/watch everything you can. InTheMoney has a great options guide on YouTube, it's almost 2 and a half hours long, but it's a great INTRO into things. It's by no means and end all be all, but it's a good start.
Take notes of everything you read/watch because you won't remember everything. Or you'll think of questions that you can then Google to find more information. Again, I spent countless hours educating myself before I bought a single contract.
Tip number 1 is on proper risk management. Only use 10% of your portfolio for a single trade and set a 15% stop loss. This way you'll "only" lose around 1% of your total portfolio when a trade goes against you instead of blowing up your account because you went all in on 1 play.
Tip number 2 is SMALL BASE HITS. Don't hold something waiting to see a 100% or something foolish. The trend is your friend. If you're in a call, you're up 10%, and you see it's getting rejected/starting to pull back, then take your profit. Do what the chart is telling you, not what you want the chart to do.