Sunday, October 13, 2013

Learn how to trade Options

By now, readers of my blog will know that i'm an investor and i invest for the medium to long term. I still do trade short term sometimes but mainly in CFDs only. This post is about options trading. Since i do not really trade options, it'll be more appropriate if you can learn from an options trader in Singapore itself. I've got the chance to know this young guy called Neo Pok Chow. He created a site called Options Rising Star to teach others about options trading.

Below is a excerpt of his blog post on Long Call options:

Long Call
In this post, I’ll be going through what a call is, in greater details. Yes, we are getting technical here. Our feet are just getting wet in this big ocean. So stay close with me alright!

Today, I will be introducing to you something called the “Risk Profile”. Specifically, this is the risk profile of a single long call option(meaning you buy a call).

But first! What’s a risk profile?
A risk profile is a graph that shows you how the position you have on looks like. It presents the risk that you have, all into a graph. It shows you the-

Profit/Loss(P/L), represented by the y-axis(vertical).

Price of Underlying, represented by the x-axis(horizontal).

Profit Potential and Risk to the Downside(Loss), represented by the graph itself.

Breakeven, represented by the intersection between the graph and the x-axis. Breakeven is the point at which your position has no win nor losses.

I am introducing this to you at this early stage so you can get a visual and actually see how the position looks like. This introduction will also open your eyes as to the.......

To read the full post, click here

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