Options Trading

How do speculators profit from options and

learn how to become a professional trader

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About the Author

Sell Option Premium is created for traders which are passionate about options.
The articles provide traders and investors with the knowledge of how to invest
their money in stock options. Selling Options in order to receive Options
Premium have been proven the best way to make profit.
The founder Richard Forest started with trading 20 years ago. He started with
buying stocks, invested in hedge funds and leased stocks. He wanted to better
than the average fund manager so he became a self directed trader.
Early in his own financial investing experience, he lacked an understanding of
the market and didn't have the knowledge necessary to make consistent
profitable trades. He saw a quit different method of training. And while
bringing that training into practice, it became obvious to him that this kind of
education opens the door to better investing. It helped him to outperform the
markets.
Since 2012 he discovered a Traders Network who enabled him to understand
trading as never before. He became a much better in creating profits on a
constant basis. He uses the studies provided by TastyTrade.com.
What does contribute to his success? Selecting the right kind of Options with
enough option premium and a decent probability of Profit. Staying small and
not taking too much risk in each trade. We Sell Options for Premium, this is
much more profitable way than buying options. Selecting better strategies,
entering the trade at the proper time, trading small and often, managing
winners did help him to become a successful trader.
Now he wants to share his experience with you so that you outperform the
markets and that you get successful too.
.

Table of Contents
1. The Art of Trading
2. Tips for beginning traders
3. What are Stock Options?
4. Investing 101
5. Solid Mechanical Trading Strategy
6. How to Trade with an Edge?

The Art of Trading

Learn how to trade the most profitable way and make trading your
daily job until you retire.

Introduction
Sell Option Premium is the most profitable way. We show you how to trade
successfully. We want you to know how create more opportunities to profit.
We teach option selling techniques you have never seen before. You do not
have to be dependent of the direction to make money and we show you how to
improve your chance on profit tremendously.
This ebook and website is loaded with meaty content. valuable for any trader.
We help the starting trader to become a professional one. Secrets are revealed
how the best of the industry trades make their profit. The content is backed up
by research and not general expressions
or assumptions.
Key Subjects
A lot of people trade to big and are out of business after some time. This Book
will help you to make you an experienced trader that can settle for an early
retirement and spend time with his loved ons.
Learn how to trade small?
Make consistent profits?
Let you portfolio grow into a big one?
This ebook is so written that you may understand the basics of trading and by
applying the principles that you make into a professional career.
Richard

Tips for beginning traders

Option trading may be daunting for beginning traders, but with the right
foundation and a gradual investment of funds, you can expect to see
significant returns. Here are a few tips to help you make smart investment
decisions.
Do not invest money you cannot afford to lose. Make intelligent decisions
about what you can afford to invest. Selling Options is an excellent way to
define your risk. You can determine how much risk you want per trade.
You will receive option premium for every option you sold. Do not trade too
big, that is do not sell many contracts. Start slowly, trade option spreads to
reduce your risk. Once you have realized gains from trades, you can begin
to reinvest those gains which have now become your principal.
Do not trade if you don't have time to research. Options trading should be
approached as a part-time job. If you like to succeed you need to invest time
to learn how to trade options and what strategies to apply. Otherwise let
your capital be handled by a fund manager.

No quick get rich scheme. Imagine we are playing at a basketball court. Ill
give you $100 only when you score 10 times at a row. Or you can choose to
throw the ball 10 times and Ill give you $10 for each time you score. If you
are decent in scoring than you choose to make the 10 smaller shots that
reduces the effect of an unlucky bounce can have on the unlucky outcome.
So, we choose to enter option strategies with high probability of success
and enough option premium.
Trading in small positions has the same benefit on your portfolio. The ideas
behind this approach is that if each of your trade uses the same strategic
logic you create the same probability of success. It makes sense that you
allocate for each trade the same amount of money. Read more -- The
importance of capital allocation
Diversify your investments. While stocks offer the attraction of seemingly
easy money, they are unreliable sources of income. You only have 50%
chance of making money. With trading options you can sell options for
option premium and choose several strategies with a high probability of
profit. If you choose different high POP trades you will consistently make
money.

"Know why you are buying a particular security, how much to

invest, what your expected return is, and have an exit strategy."
"Have a plan and stick with it," Beauregard
Make a plan. Irrationality is the enemy of options trading. Before trading
options, consider what circumstances would lead you to sell it. When people
regard trading as a business a trading plan is necessarily. It is the basis for
selling options and making consistent profits. It is so important because the
Trading Plan describes what a trader does to set up trades, how to manage
existing trades and when to take profits.
Don't give in to fear. Something many beginning stock and option traders
deal with on a daily basis is the fear of losing money invested. While you
may see stock values plunge for a company, don't despair or pull your
money out. Most of the trades are being tested and after some days the
trade could be profitable.

What are Stock Options?

Companies who needs money to expand their business can go to the bank
for a loan or issue Stock Options.
Options have two similar buy slightly distinct meanings in everyday use.
The first use is in the sense of employee stock options. And the second use
is that stock options are traded on an exchange.
An employee stock option usually grants the employee the right to buy
shares of the company at a discounted price. Companies frequently issue
Stock Options to employees for a variety of reasons.
as an incentive for the employee to help improve the company's
profitability
to encourage them to stay with that company
to help improve the employee's loyalty and commitment, and
to give them a sense (however small it might really be) of ownership.
Stock options became popular as incentives to employees of publicly traded
companies. If you worked at IBM and IBM stock was at $90 a share, you
might have been given stock options to buy 100 shares of the IBM stock at
$95 a share by December. Since the stock was currently at $90 and you had
an right to buy the stock at $95, the option is worthless.

The idea with employee stock options is that owning them does provide an
incentive for you to help get the stock up to $100. If in December the stock
is less than $95 you would never exercise your call and buy the stock--it
would just expire worthless; but if the stock was at $95.01 or higher then
you would exercise it and buy the stock at $95. Now you see why it is an
"option". For call options, if the stock price is below the "exercise" price then
you don't have to, nor should you, exercise it.

Exchange Traded Options

The stock markets have created exchanges that trade "Stock Options." These
stock options come in two types. There are call options, which are the right
to buy shares of a stock at a certain price by a certain date. And there are
put options, which are the right to sell shares of a stock at a certain price by
a certain date.
In every day language, an option is defined as "the power or right of
choosing" There are two types of stock options -- calls and puts. Employees
always gets call options.

Stock options are defined by 4 characteristics:

There is an underlying stock
There is an expiration date of the option
There is a strike price of the option
The option is either the right to buy or the right to sell (call and put,
respectively)
The difference between calls and puts is the owner of a call option has the
right to BUY a stock at a certain price. The owner of a put option has the
right to SELL a stock at a certain price.
When you own stock options you have a choice if you want to exercise the
stock options. You can buy the stock at that certain price by the expiration
date. If the current market price of the stock is less than the strike price of
the call option, then you would not exercise the call option and buy the
stock.

Likewise, when you own a put option you can sell the stock at the strike
price until option expiration. If the current market price of the stock is
higher than the strike price of the put option, then you would not exercise
the put option. If you choose to buy the stock, it is called "exercising" the
stock options. If you choose not to buy the stock, the stock options are said
to have "expired."
We like to sell options in order to receive option premium. It give you better
odds to close options for profits.

Investing 101

Have you ever wondered how the rich got their wealth and then kept it
growing? Do you dream of retiring early or of being able to retire at all? Do
you know that you should invest, but don't know where to start?
If you answered "yes" to any of the above questions, you've come to the
right place. On this website we will teach you how to sell options and receive
option premium.
We will teach you how to trade options in a most profitable way from the
ground up. The world of finance can be extremely intimidating, but we
firmly believe that trading stock options and greater the financial world
will not seem so complicated once you learn some of the lingo and major
concepts.
We have to emphasize, that investing and trading is not a get rich quick
scheme. Taking control of your personal finances will take work. And you
need to be willing to learn new skills. It will take some time though. But the
rewards will far outweigh the required effort. Contrary to popular belief,
you don't have to let banks, bosses or investment professionals push your
money in directions that you don't understand. After all, no one is in a
better position than you are to know what is best for you and your money.

Options has many advantages. You can start with a small capital and
realise excellent profits. Entering the right strategies gives you a high
probability of success. Start with selling options.
Regardless of your personality type, lifestyle or interests, this sell option
premium blog will help you to understand how to sell options. But it doesn't
stop there. This tutorial will give you insight into techniques and strategies
and help you determine what strategies suits you best. And reveals
strategies and trading techniques professionals has not seen before. So do
yourself a lifelong favour and keep reading and get started with trading

Solid Mechanical Trading

Strategy

Mechanical trading is based on parameters that have been validated by

back testing quantifiable market data. It has nothing to do with trading
robots.
It is a way of trading, selecting right underlying and using the right
strategy. Determine how to set-up the trade and know when to exit. Once
you know what to look for and have your criteria been defined, the trader
should follow the system exactly.
Typically we choose options with high liquidity and high Implied Volatility
so that we can sell much option premium.

Purpose
Obviously, the main purpose of any sort of trading is to make money!
However, as any trader knows, as soon as there is money at stake, emotions
have a nasty habit of clouding the trader's judgement and causing him or
her not to act in his best interest. By knowing which stock options to select,
the entry and exit points, a mechanical trading system (MTS) is supposed to
help the trader overcome this perennial blight of emotion. With emotions
eliminated from individual trades the trader may be in a stronger position
than one who does not have fixed rules to blindly follow and is this said to
be at the mercy of caprice, fear and greed.

Structure of a Mechanical Trading System

Most MTSs are reactive by design. If a stock or a commodity acts in a certain
way, the system assumes that the stock or a commodity will continue to act
that way. It generates this conclusion based on the formulas programmed
into the system. Some MTSs also compute a large array of indicators in an
attempt to increase confidence of an action recommendation. Each order
placed is governed by a pre-determined set of rules that are governed
purely by market action. In other words, MTSs are techniques that make
trading decisions for you. You input the trading data, and the system
generates a response that indicates the appropriate action. You buy, sell, or
do nothing depending upon the formulas this system uses and operates
upon. The latest computer versions of these mechanical systems are
completely automated "black box" systems: turn the computer on, start the
system, it updates your database, generates trading recommendations, and
places your orders directly to the brokers.

Types of Mechanical Trading Systems

Mechanical systems are usually trend-following or counter trend, while
others work best while the market is in consolidation.
Systems that wait for a trend to be established before signalling an entry
tend to incorporate moving averages, especially moving average
crossovers. Some mechanical trading systems try and get in earlier by
buying or selling breakouts
Counter trend systems tend to wait for price to be overextended in relation
to previous action. This means that option is more expensive that it should
be. This provides us an edge in trading. It is a solid basis to sell options and
receive option premium. When fear is out of the market options become
cheaper. We typically buy them back for a much lower price or wait until
they expire worthless.

Advantages
A MTSs is used to ensure returns and remain consistent over several
market conditions.
Provide objective rules to follow. Traders who are apt to trade on a whim,
or out of boredom, or because they think they know where the market is
going can use an MTS to avoid making costly errors. We typically close
positions when we make 25-50% profit.

Disadvantages
Back testing does not mean that a MTS will have no loses.
The market has a habit of ironing out the anomalies that may allow MTSs
temporarily to work.
Very dull to trade, no intellectual stimulation. Trader becomes
superfluous once the data mining, research and testing is completed.
Low win rate, inefficiency, failure to respond to market paradigm shifts
Constructing your own Automated Trading Strategy
Tom has many tips to develop your own trading system. See the video below
when he gives tips how to create a mechanical trading trading system,
selling options to receive option premium and make profit.
Read also http://www.tradingsystemlife.com

Read the following article about how to Develop your own Trading Plan or
How to make consistent profits with the best trading plan.

How to Trade with an

Edge?

What Exactly is a Profitable Edge?

Traders are constantly looking for a trading system that hits 100% winners
or a system that never makes a losing trade. This for many reasons is
impossible and further below in this article it is explained in more detail
why achieving an 100% win rate is simply impossible.
So firstly what is an edge? A profitable edge is nothing more than an
Indication of a higher probability of one thing happening over another. In
other words, a trading edge is a higher probability of one thing happening
over another. The key words are Higher Probability. Sell Options to
receive premium and create high probability trades.
To be a successful trader you need a profitable trading edge. You need to
have something that will give you an edge on the market. Your trading edge
needs to give you an an Indication of a higher probability of one thing
happening over another. That does not mean that every single trade will
work out because we know that is simply impossible, but what it does mean
is that when you have your edge it can give you a higher probability of
putting you into winning positions to make money and that is the key.

The next key is to learn, practice and master your trading edge so the
probability grows higher and higher and with it the profits as well!

How to create an traders edge

A trader creates a trading edge when they sell options when they are at a
price extreme, are rich on premium, benefit from theta decay and have a lot
of chance that they expire worthless.

Theta Decay
Theta measures how much value an option will lose each day due to the
passage of time as the option gets closer to expiration. This is known as
theta decay or time decay. Each day that passes a small amount of time
value ticks away. Theta is the measurement that quantifies that. And you
can literally see how much it'll lose each day even if the underlying stock is
unchanged. These options has a high possibility of profit.
Being long options, whether that's buying a call or a put, means the Theta is
working against you. However, there are many different strategies where
theta can work for you. Those strategies entail selling options aka writing
options, i.e., being short options, either calls or puts, in combination with
your longs.
Most used strategy is to Sell out of the money options so that you receive
option premium. Out of the money options will expire worthless if the
underlying does not reach the strike price.

High Probability Trades

You can create an edge by setting up high probability trades. An investor
enters High probability trades when they sell options which are much likely
to expire worthless. This kind of trader uses option greeks to sell options.
The choose options with high delta. They most of the time sell 1 standard
deviation options with a delta of 68. When a trader sell these options they
have sold an options which has 68% change to expire worthless. The trade
always choose liquid options which have a high Implied Volatility. Options
will get a high Implied Volatility when there is uncertainty in the market.
This happens when the price of the stock drops or fluctuates more.

Mean Reversion
Entering options when they are at an price extreme is another way to create
an traders edge. When the prices of stocks are dropping it causes extra fear
with investors. Therefore the price of the option prices are most of the
times overstated. Mean reversion is simply the fact that investments can
trade far above or far below their long-term average returns for periods of
time, but in the end they eventually tend to move back towards their
average. The phrase reversion to the mean refers to a statistical concept
that high and low prices are temporary and a price will tend to go back to its
average over time. We seek out options that are at an price extreme. We are
selling options who moved much or at an all time high or low. Most of the
time these options has a high IV.

Conclusion
Traders want to have an edge in trading. We discussed how you can create
an edge in three ways. You Sell options to receive Option Premium. Making
use of theta decay. Of course you choose options with enough premium.
When sold at a price extreme you know that they will revert to the mean.
And you seek out options that far enough out of the money so that they
expire worthless.

Call to Action
This short document is only a tip of
the ice mountain to give away all
the important information
Learn more on selling options

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