The Options Cyber Course was developed by experienced traders at CyberTrading University. CyberTrading University has been teaching options traders around the world with our Web Meeting virtual classroom software. CyberTrading University is the leading training and education provider for OPTIONS trading as well as NASDAQ trading. CyberTrading University was established in 1995 and has taught thousands of traders and investors around the world.
With many years of combined experience in the options, foreign exchange, futures, and equities markets, the CyberTrading University staff is one of the most experienced groups of trading professionals in the market today. The Options Cyber Course is a product of this experience and gives traders an insight into successful options trading that only a market maker can.
CyberTrading University has devoted significant resources to the education of our clients, and is the leading online portal for options education powered by CyberTrading University's affiliates.
There are two ways to use options – Speculating and Hedging
Trading is a game of probability and risk management whether you are trading stocks, options, forex or futures.
Hedging strategies (Spreads) can greatly increase your probability of success, but as in all trading – strict risk management applies. Still - increasing your odds of success from 33.3% (directional trading) to over 75% (hedged trading) gives you a large trading edge.
Hedging strategies (Spreads) can be utilized as an outstanding risk managed approach to the markets. Spreads can be used as a stand-alone strategy or a compliment to directional trading.
Speculating
Speculating with options is essentially making an educated bet on the direction of the underlying instrument. While this form of speculation can offer tremendous leverage and potential returns, it can also work in just the opposite direction and quickly reduce the equity of a speculators portfolio. Not only do options speculators have to be right about the direction of the underlying, but they also have to right about the magnitude and timing of the move. That can be asking a lot from an unpredictable market.
Hedging
This is where the magic and versatility of options come into play. This where investors change from speculators (guess and stress) to strategists. Hedging with options can allow investors to profit without predicting the direction of the market, generate substantial income month after month, create no risk positions and eventually buy an underlying instrument at a substantial discount to its current market price. Hedging is essentially insurance against adverse movements in an underlying instrument. Investors can use hedging strategies to lock in the value of a profitable portfolio or to collect insurance (option premium) money to have the market pay for downside protection of an underlying.
33.3% Chance of a Positive outcome or 75% Chance of a Positive Outcome - Which do you prefer?
When directional traders put on a trade, they have a 33.3% (1/3rd) chance of making money. Once a trade is put on, only one of three outcomes can be present when the trader wants to close the position. Either the underlying is up, flat or down. If the trader was long the underlying (wanting it to rise) he will not make any money if the underlying is flat or down. The only way to profit is if the underlying went up.
Hedgers however win on THREE out of FOR outcomes. Right out of the gate, the odds are much more in favor of a trader having a profitable trade. A very quick example; A trader puts on a neutral to bearish spread play and collects a credit of $700.00 That’s real money deposited to your brokerage account the next day. The options expire in 31 day. As long as the market stays flat, rises a little or falls (3 out of 4 outcomes) over the next 31 day, the spread will be profitable. The market could even rise a little and the trader could still make money – although not the 100%. This is just scratching the surface at what can be done with hedging strategies. |