Trading Involves Risk

Trading Risk management

It’s a well known fact that trading involves risk. Many people have been warned about the nature of the markets, and sadly, many have also used this fact as a means to stay away from trading. Risk, while it is present in trading, is also present in each and everyone’s lives. Everywhere you look, there is risk involved, and somehow we all managed to survive. Thus, this means that we all have our own risk management techniques that enable us to cope with the various risk that everyday living presents to us. This is exactly the same with trading risk management.

While trading involves risk, it is not something that people should stay away from completely, as trading is a great way to making great money in the markets. In order to thrive in the markets, the first thing that has to be in place is your trading risk management. There are a few areas in trading risk management that you would need to look at. Here are the important ones as a trader:

1. Risk Assessment
   Before entering into a trade, know how much risk is involved with what you are trading. Each trade would involve varying degrees of risk. There are strategies that are more conservative than others, and hence can be deemed to have lesser risk. You need to be comfortable with the risk before getting into a trade. One important thing to remember is that when you enter a trade, you cannot back out until you close out your position and exit it with either a profit or loss. Hence, you need to ensure that you have assessed the risks involved and are willing to take it.
2. Position Sizing
   When entering into a trade, one other aspect that you need to think about is the size or the amount that you are willing to risk for a particular trade. There are general recommendations on how much you must risk on your capital for a specific trade, but it is up to you to know if you are comfortable of risking a specified amount. Some say to risk only 5% to 10% of your capital, but it can vary depending on who you talk to and what your risk tolerance and trading objectives are.
3. Stop-Loss strategy
   If you are in a trade, you need to work out at what level you would like to exit if the trade goes against you. The nature of trading is that we all try as much as we can to get as close to accurate picture of the market, but no one has a crystal ball and we can get it wrong. In order to survive in trading and make money, you need to learn to cut your losses and make your profits run. By putting in a stop loss measure, you are implementing a trading risk management strategy that guarantees you to get out of a trade when you’re not comfortable with the way things are going anymore.

The three items above are the essential concepts for trading risk management. If you would like to learn more about trading and trading risk management, you can count on the people at Planet Wealth to offer you fantastic advise on how to trade the stock market successfully. Their wealth of experience in trading the markets has given them a great knowledge on how to do trading risk management.

This is a two-part series on how to trade options. In continuation from the trading options were laid out, this post will now show you the different types of options.

Options Trading Types

Options can be classified to 2 types: Call option and Put option. A call option entitles the holder of the option the right but not the obligation to buy the stock at an agreed date for an agreed price. A put option, on the other hand, entitles the holder of the option the right but not the obligation to sell the stock at an agreed date for an agreed price. The holder in this case is the buyer of the options contract. Therefore, how to trade options of each type would be as follows:

Call Option: Buy – means that you are wanting to buy the stock at a specified date for a strike price

Call Option: Sell – means that you are wanting to sell the stock you own at a specified date for a strike price

Put Option: Buy – means that you are wanting to sell the stock you own at a specified date for a strike price

Put Option: Sell - means that you are wanting to buy the stock at a specified date for a strike price

When you buy an option, you have to pay a premium to the seller of the option. Regardless of whether you are able to exercise the option (to buy or sell the stock), the premium is held by the seller of the option. This premium amount is determined by the market price, and has some mathematical formula used to calculate its value. The formula is not that simple, but there are key factors which contribute to the pricing of the options premium. This is not something for beginners to look at on how to trade options. I generally don’t look so much into the pricing model, as it can be complicated, but it pays to know the concepts. If you would like more information about the option pricing model and how to trade options by looking at these figures, it is explained better with Planet Wealth’s education program.

For now, you would have hopefully learned how to trade options in terms of the 2 types of options. Watch out for part 2 for the next installment of how to trade options.

Understanding Options Trading – Key to Success

When it comes to Options Trading, the key is knowledge and experience in order to succeed. Many people have tried to get into making money on the options market, but a lot of them have lost money instead and started touting options trading to be very risky and to be avoided. Well, it is true that there is risk involved in options trading. However, that risk can be mitigated if you know how to approach options trading and use the right strategies. One great thing that I have found is that having someone to guide me and show me the ropes when it comes to options trading made learning much easier for me and improved my success rate. I signed up to the services of a financial education and investment company called Planet Wealth, which I recommend for their expertise and great quality of service.

Who is Planet Wealth

Planet Wealth, the company I have been learning options trading from (and launching in the US very soon), has been in operation for over 8 years, and the owners and partners of this organisation actually are real options traders themselves. It started out as an educational company for options trading in Australia by Andrew Dmitri, a successful options trader and a couple of his other friends who are also successful options traders. They have started trading options since the late 90s, and have achieve fantastic results. Since then, they have wanted to share their knowledge to those who want to be successful financially, and there came about Planet Wealth.

Planet Wealth guides its students step-by-step on how to trade options, and also offers the ability to copy the trades that these traders do on their own accounts. They have walked the talk since they started, and whatever trades they recommend to their clients, they also trade it themselves for their own money. The exciting news is that they have partnered with one of the most successful options traders in the US, and are now launching in the US! Understanding options trading will even be much easier and accessible to those who live in the US with the launch of Planet Wealth US.

Copying Trades From The Experts

Now, making money with options trading is becoming more of a reality with the guidance and expertise at Planet Wealth US. Just when you say you don’t have time to monitor your trades and look at the market, Planet Wealth has gone a step further in trying to help people succeed in the financial markets. They offer an auto-trader service wherein all their trades on their own personal accounts will be copied and replicated in the same way in your account. Thus, you can be assured that they have their best interests at heart in that they will not trade something that they don’t think will work or be profitable. Of course, there is always the risk of having losing trades, but their expertise in options trading will help you in minimizing that and maximizing the returns on your investment.

Understanding Options Trading With Planet Wealth is not rocket science. It is that easy. You have the option to learn through their education program and be guided by them until you become more confident, and you also have the option to copy their trades automatically as it happens. Your likelihood of success in options trading will accelerate with Planet Wealth US.

The Place to Find Option Trading Tips

Options Trading is one area that not as many people know when it comes to trading and the financial markets. It is not as common to trade options as it is to buy stocks or shares of a company and make money from it. Yet still, there are a few who have learned how to trade options and become successful in making a consistent income from it. However, option trading requires more knowledge in order to be successful. It is not as simple as putting your money aside and hoping for it to grow in the long run. This website will offer some option trading tips and strategies to make an income from trading options.

Before you step your toes into option trading, the first thing that needs to be addressed is to get back to basics and understand what an option is, and the terminologies that come with option trading. The option trading tips will only be useful once we understand the basics and then start developing knowledge on the different ways to trade options. I started out learning option trading this way, and I believe that if you are to make money using option trading strategies, you need to know the basics and build your foundations right.

Option Trading Terms

When trading options, you are in fact dealing with contracts. Essentially, an options contract is an entitlement to buy or sell a certain stock or share at an agreed price and at a certain specified period. Before further delving deeper into the details of options contract, let us define certain words that have been mentioned in the above statement:

• Expiry Date – the agreed date on the options contract
• Strike Price – the agreed price at which the stock is to be bought or sold

Options contracts give the holder the right but not the obligation to buy or sell the stock of share on or before the expiry date at the strike price. This means that depending on the type of options, the holder of the contract may buy the stock or share if the share price hits or goes above the strike price, or sell the stock if the share price hits or goes below the strike price. If it happens that the holder of the options contract has to buy or sell the stock or share, this action is called “exercise”.

Why Trade Options

There are many reasons why traders and investors would trade options contracts. Two of the most common reasons are:

1. Stop-Loss – Options are used to protect assets (stocks in this case) from the possibility of the stock price dropping lower than what the stock holder is willing to risk. This forms as a stop-loss measure for the stock trader, as this will ensure that he or she doesn’t have to sell the stock any lower than the strike price regardless if the existing price of the stock at the time is lower.
2. Extra Income – Options can be used to generate extra income from the stock held by the owner. When selling an option to another party, the seller receives a premium for risking the possibility of losing his or her stock holdings. This premium is kept and earned by the seller of the option, regardless of the option being exercised or not.

Each market or country will have mostly similar concepts when it comes to options trading, and there will be slight differences with each one (i.e., the American options trading requires 100 shares of a stock to form a contract, whereas the Australian options trading requires 1,000 shares of a stock to form a contract). Learning these terms and strategies can take time, but with the help of a fantastic financial education and investment company like Planet Wealth, your learning and involvement in the options trading arena will be accelerated through their wealth of knowledge and experience. More of these basic option trading tips in the upcoming posts, so watch out for the next series of option trading tips!