Option Trading Tutorials

A really great way to learn options trading is through option trading tutorials. I found as I was learning to trade options that watching a trade get set up, entered, managed and reviewed was a great help to my learning to trade.

It has been my experience that it is helpful to watch a trade being placed in the form of a video AND I've also found it helpful to learn about trades being set up and managed by reading about it. That's why I've included both formats here on this page.

I'll occasionally put up a new video tutorial, especially on strategies I haven't shown before. This will offer the opportunity to discuss not only the trade itself as it develops, but also the use of some of the trading tools for trade analysis and trade management.  Watch for the individual links to these to show up also in the right column and accessible from every page on the site.

Additionally, I'll be setting trade tutorial pages where I'll choose a strategy and create a trade page. This page will act like a trade journal so I'll have the opportunity to demonstrate this process as well. Each new trade will have a page where the trade is set up and discussed as I prepare to enter.  I will add updates to these pages as I monitor the trades and I'll ultimately have a trade conclusion where I assess the result of the trade and any lessons learned.  This approach is intended to be a more formal demonstration of the trading plan, trade journal and trade log concepts I've discussed on other pages.

What I'll be doing on this page is collecting all the option trading tutorials I put together.  From this page, there will be a link to details of each option trading tutorial .  Below is a summary of the trades in terms of the trade type, gain/loss, etc.

These trades will largely be constructed from index options or ETFs of a particular index. There are many reasons for this, some of which are outlined on the index option trading page and some on the ETF options page. The key reasons though for me has to do with volume traded and the fact that no trade is dependent on any one stock and any events that could cause huge swings.

I want to point out that I've placed all these trades in an option paper trading account at thinkorswim. I am NOT making any recommendations on any of these trades.  These tutorials are simply offered for educational purposes.

Entry Date
Trade
Target profit
Actual profit/loss
Notes
1/22/2013 Put Calendar Spread (SPY) $105  -$3 This trade didn't turn out quite as expected but the adjustment strategy helped ensure it was a small loss.
3/26/2013 Put Credit Spread (DIA) $60 $60 The trade worked out exactly as expected
4/4/2013  Call Credit Spread (DIA)
 $88  -$30 This trade didn't work out as planned - except that I had a technical exit to close if I was wrong. I was and it did!
6/27/2013 Put Credit Spread (SPY) $72 $74 This trade went exactly as expected and we even got a bonus on the fact that the gap up gave us a better than expected fill price when the limit order triggered.

While the point of these trade tutorials isn't necessarily to have each one turn into a winner, it's still nice to be able to track the result over time. While I've summarized the trades above, I want to provide a portfolio summary much like we would if we had a trade log. After all, it isn't really about how many winners or losers there are but what the equity curve looks like. The table below will show the cumulative result of closed trades. Note: This includes open debit orders so the balance may seem off sometimes.

Starting Date Starting Balance Current Balance Cumulative Gain/Loss % Portfolio Gain
1/1/2013 $17,377 $17,492 $115 .17%

As I continue to put on trades, how do I choose new strategies to trade? One way is through taking more of a portfolio management view. Check out this video to see an example of portfolio management in action.

Note: This trade discussion is for educational purposes only. I am NOT making any recommendations on the trade or the underlying stock or ETF. If you decide to follow this trade, please do so in a paper trading account. Trading options involves risk and some options strategies can result in losing more than the original amount invested.

thinkorswim, Division of TD Ameritrade, Inc. and Success With Options are separate, unaffiliated companies and are not responsible for each other's services and products.




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