lystn

Hey everyone, Kirk here again and welcome back to the daily call. Today, we are going to answer the question – “Where to start trading options?” If you’re listening to this and if you’re new to options trading, hopefully we can point you in the right directions. We obviously can’t cover everything there is to know about options trading in 10 minutes or less, but hopefully we can start you in the right direction and give you some conceptual frameworks for how to learn options trading, how to go about learning anything really and it's all about digging into different topic areas. The first thing is obviously, people will start asking – “Where can I go for options education? Are there any books I can read, paper trading, brokers, etcetera?” I always say you should start with education. Learn first what you're getting yourself involved to in before you actually start opening up an account and start trading real money. And so, you can take a course on a place like Option Alpha. There’s also free courses out there like the CBOE has, the OIC, your broker like Thinkorswim or Tastyworks might have a free options course as well. Take something out there that just gets you started down the path of learning how to trade options, the basics and even hopefully, some of the more advanced training stuff. But please do not pay for any of that education that’s out there. I think there’s a lot of companies who charge for very basic education that you can get elsewhere and is 1,000 times better with a more reputable company. I'll let you be the judge of that. You go out there and find what you want and start learning. As far as books are concerned, I don't think at the moment that there are any really good books that I would recommend to somebody starting out trading. There’s a lot of very advanced books on option pricing or on technical analysis or on volatility trading, but that's not the type of research and education that I think that you would want to read if you are starting out. If you’re going to start trading options, I think you forego the books right now. I think in this business, it's very much that you learn more by watching and doing an online course or a paper trading platform than you would read necessarily in a very technical book. I often relate this to a manual for a car. We don't necessarily need to read the ins and outs, very specific manual for how a car functions. I don’t need to know exactly what amperage the alternator is or where the belts are connected in the engine compartment. I don't need to know that to drive the car down the road. But maybe you need to know where the steering wheel is and how to adjust your mirrors and how to use the gas and the break. That's what I’m talking about, is learn the big rocks first and later on, if you want to dig head first into black-scholes, pricing models and how it’s calculated and hand calculated out… Unfortunately, I had to back when I was in college. We had to calculate it by hand which was insane. If you want to learn how to do that stuff, by all means, it’s out there. You don’t need to start with that. I think it’s overkill to begin with. I’d say books you can avoid until you get into the more technical aspects of trading the more very, very niche topics. The second thing is paper trading. I think that paper trading is a great way to learn the mechanics of the market. There’s obviously some drawbacks and benefits to paper trading. We did a whole podcast on how to successfully paper trade on our regular weekly show, so you can go over to that and check that out. Just search the website or search in iTunes on paper trading. But I think the idea behind paper trading is to use it for what it’s meant to be. It’s practice. I think about it like if I’m going to play basketball, I’m going to practice and I’m going to shoot a lot of free throws, I’m going to shoot a lot of jump shots, I’m going to shoot a lot of layups. That’s what you should do with paper trading. You should use it as a means to learn the mechanics and do lots of trading and lots of activity in your paper trading account, so you learn how generally the order flow works, how to build orders, how markets move and pricing moves. It’s not all going to be perfect. Orders are going to fill in paper trading much faster than they would maybe in real life, but it gets you involved in the system and the process a lot quicker. I think brokers are also a great place to start. Many brokers have onboarding webinars, have training videos on how to use their platform, also very basic options trading education, so you can check out some brokers as well. Again, whether you use a local US based broker like Thinkorswim or Tastyworks, if you use an international broker like Interactive Brokers or TradeStation which is more of an international broker than some of the other ones, then I think that's a good place to start as well. I think there’s obviously some good training and content in there that you can get started with. Hopefully that just points you in the right direction as far as where to go. Now, the last thing I want to leave you with is just this concept of learning by topic. I think no matter where you start, I would suggest that you learn and focus on different topic areas or conceptual learning as you start your journey. What does this mean? This means if you’re going to start learning how to trade different option strategies, don't go out there and read everything about every option strategy. Focus on one type of option strategy for an entire week let’s say. Maybe the first week, you’re going to focus on an iron condor option strategy. You’re going to read everything about iron condors. It’s going to be topic or concept specific to iron condors, how to enter them, how to exit them, how to adjust them, how to price them, how to manage them, everything about iron condors you can possibly get your hands on. Yes, there will be overlap. You will hear about other strategies like a straddle or a strangle, but you're not going to deviate off course. You’re going to learn everything you can and basically be a sponge with regard to iron condors in that first week. Now the next week, then you're going to learn about a different topic. Maybe that week, you want to really start diving into position management, so allocations and what strategies to choose, Beta weighting your portfolio. Now, you dig deeper into position management. Then the third week, maybe you go back to a different option strategy. Now week three, you’re going to learn everything there is to know about strangles. At that point, now a lot of these overlapping topics will start to make sense. You’ll start to connect dots, you’ll start to connect the wires if you will in your brain and concepts that you learned earlier in week one will now make more sense by week three. It’s just how this happens. This conceptual learning process is really how you learn anything in life. You learn it in concepts and stages and chunks. You see this oftentimes in language which is a really common way that people learn conceptually. You’ll learn all the different words maybe around the house, like a cup or a fork or a knife and then you’ll learn about people's jobs as the next concept or chapter, so a police officer, a firefighter, a baker, a librarian and these things now start to crossover and they start to intersect at some point in the future and it brings everything together, weaves this wonderful net of knowledge that you now have over time. Don't get too bogged down as you start trading options. Learn how to conceptually go through different topic areas or content areas in the trading space. Again, if you hear something that doesn't make sense right away, just understand as you start to learn more and more concepts and start to focus on these different niche topics that things will start to connect the dots and be blended together which is obviously what you want. Hopefully this all helps out. Hopefully it points you in the right direction. As always, if you need any help or have other questions, you can always check out Option Alpha which we have free training and free tracks for you guys to go through. Until next time, happy trading!