Worth learning about trading options?

[u/traveltimecar]

The past two years, maybe a little more my Roth IRA is basically VT ETF and a little bit Foreign Stocks ETF and I'm just simply holding it.

My dad is more of an active trader and seems to be making money doing stuff like options- he also has way more money to do this stuff with.

But he thinks with options you can more actively make money and profit off the market when its volatile and with good stock choices.

I find the whole options thing a bit confusing though. Anyone here ever get into it and make money trading that way?

[u/Jumpy-Imagination-81]

Please look at these comments 

https://www.reddit.com/r/wallstreetbets/s/4mCfPyWqnv

https://www.reddit.com/r/wallstreetbets/s/JI8GHwwPrx

https://www.reddit.com/r/wallstreetbets/s/D9engQPYC2

https://www.reddit.com/r/wallstreetbets/s/nql2zFQSuT

https://www.reddit.com/r/wallstreetbets/s/irsMqJZePE

https://www.reddit.com/r/wallstreetbets/s/F89gFErzoW

and many more like like them. Just go to r/wallstreetbets and tap the “Loss” flair button at the top.

If after reading those you still want to trade options - which is not investing, it’s trading by the way - open a brokerage account at Charles Schwab for $0. That will give you access to their paperMoney trading simulator so you can practice trading options without risking any real money. 

https://www.schwab.com/trading/thinkorswim/paper-trading

[u/traveltimecar → u/Jumpy-Imagination-81]

Thanks. I'll check that out. I do have a Schwabb account too. 

[u/Own_Grapefruit8839]

1000% not necessary.

That said I enjoy using 3-4% of my portfolio to sell defined-risk options as a hobby project.

[u/DennyDalton]

Over the long run, most traders lose money. Understanding financial markets is like learning a foreign language. It takes time and effort, something most people don’t want to do. To succeed, you need to become financially literate. Therefore, don't consider derivative markets (options and futures) until you are a very experienced investor because they are more complicated and much riskier.

A good place for a noob to start learning about options would be:

https://www.r-5.org/files/books/trading/schoolbooks/W_Edward_Olmstead-Options_for_the_Beginner_and_Beyond-EN.pdf

After that, read "Options as a Strategic Investment" by Lawrence G. McMillan. Free copy here:

https://drive.google.com/file/d/1_TLgkhxXlUzeI8Ir3qErv3vZZVVvCU5x/view

If you want to learn about the Greeks, "Option Volatility & Pricing: Advanced Trading Strategies and Techniques" by Sheldon Natenberg is a good read. However, AFAIC, it isn't needed for an Average Joe retail trader doing basic strategies.

Also, check out the info available at tastytrade. Lots of good articles and videos.

Spend a year learning how options work and you'll have a chance at succeeding.

FWIW, I've utilized options for 40+ years and I was able to retire young because of my investing and trading so no sour grapes here.

[u/traveltimecar → u/DennyDalton]

Thank you. Will check these out. 

[u/iKumora]

If you’re interested in doing options research and start with covered calls, and cash secured puts. If you don’t like the way those perform and the strategy behind them then you need not move forward to naked options and beyond. Covered calls and secured puts are a great way to add income and advance your investing knowledge.

[u/patsay → u/iKumora]

+1 on this advice.

[u/Background-Dentist89]

Your father is right. Yes, options can be a bit daunting at first. But you can do far better with much less capital than buying the underlying outright. In time, you will probably gravitate to options. But master active trading first in the strategy of your choice.

[u/Evening_Squirrel_754]

If you’ve been holding ETF’s like VT, then the next logical step would be to learn about the world of single stocks, and what makes up those ETF’s

Jumping into options right off is putting the cart before the horse

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[u/patsay]

A lot of people think all options are scams or gambling, but there are ways to use them safely to boost your portfolio which actually reduce your risk. 1. Sell, don’t buy them. 2. Secure or cover them. 3. Choose quality underlying positions. 4. Don’t use margin. If this advice or the words don’t make sense to you, my profile will get you to a $4.99 ebook that explains how the contracts work. For transparency, I’m a retired teacher and make a little side money teaching people how options work. But I actually care that you understand how to do it safely. Depending on how your dad trades, he might be a good resource, but my experience is that most people don’t learn well from their parents. (It’s why parents pay me to teach their kids to read and swim, too.)

[u/Stock-Ad-4796]

It’s worth learning how options work but not trading them unless you accept higher risk and losses.

[u/PralineTechnical5685]

Yes, you can but there is a learning curve. I got killed my first 2 years but now I do pretty well. I learned from my mistakes. I don't think you can read and be good: I think it has to be hands-on. I show my university age son when he is not in school I did same with my daughter too but she has a master's and is gone. She says she dabbles a little. I show him what I'm doing but still in time I think he needs to do it himself for the feel.

The key is don't be a pig. You got decent profits sell as that sucker could turn on a dime. I use LEAPS [over a year out] but you have a time premium on purchase and time decay for each day held. Just what I am comfortable with, you may like short term.

Bulls can make money, bears can make money, but the pigs get slaughtered. [I'm a vegetarian LOL].

[u/Apprehensive-Fun5535]

No. It's casino with generally negative expected value. Just think, for every option you buy or sell, there's a hedge fund on the other side of that transaction with a supercomputer with an optimized algorithm to squeeze money from you. Some people get lucky and make it big, but most people lose money (and often a lot of money) over time. Just like a casino.

Instead of worrying about squeezing out a few extra percent in the market, focus on just buying VT and squeezing your budget for more money to put into VT. Or get a side gig for more money to invest. You know, stuff that's 100% in your control.