Originally Posted by
marcal
As I read this and see new traders wading in I can’t help but think....
please please do not trade options in your retirements accounts if you are new to it. It’s like flying a 737 bc you want to fly when you’ve never done it. Options if used incorrectly can decimate you financially.
Start very small and outside your retirement accounts. By the way paper trading is the equivalent of using Microsoft Flight Simulator and saying you can actually fly an airplane. It’s a lot different when it’s for real. It’s best for learning the platform.
Like flying its all about risk management, knowing your temperament for risk, and be careful entering orders bc if you enter an order wrong it can really hurt you.
this is a true statement! Although you’re limited as to what you can do in your retirements, I recommend what most have been considering, covered calls.
example; Buy 100 shares of something lower priced, say DAL for instance ($4056 outlay) and sell the Feb $45 call for $1.40 ($140 credit).
Your net debit should be $39.16
Two things happen; the stock shoots up to $60 and your shares are called away (sold) at the strike price of $45 (you collect $4500) or it stays under $45 and the contract expires, you keep your $140 And your shares. You can also roll the contract out to March and beyond the closer you get to February expiration and collect more credit, assuming the stock hasn’t gone bananas.
risks; stock shoots up and your shares are called away at $45 (if stock goes to $100, you forego $55) or stock goes to $0 and you lose all your $ you bought the shares with less the $140.
Spreads complicated things a little more when it comes to management of the position, so starting with one contract is best.
Do not go out and sell a put in Amazon to collect $10k, even if you have the cash, or unless you want to buy 100 shares of Amazon. And avoid naked calls entirely at this point until you’re more comfortable.