Why Do You Trade Options?

A lot of people ask me why do I trade options. Below I will list my personal reasons for trading options.

Big Gains For Small Accounts
Well, with option trading, you can make a lot of money with little investment. Yes, it does sound too good to be true but options move so fast. If you can recognize chart patterns, you can scalp an option itraday for a quick 30-50% gain. I've also seen options have intraday gains of 100%, 200% and even 1000%. My biggest option profit has been 80% in 15 minutes.
Like all trading, options do carry risk. Yes you can make the above percentage gains on your investment, but you can also lose your entire investment. The best thing about options is you can only lose whatever you put into it. So you have the posibility to gain make 200% on your money, but you can only lose what you pay for the contract, not 200%. Example: I buy 1 option contract for $100, I could make a 200% profit on it ($200) intraday, but if I hold the option and lose money on it, the most I could ever lose on the trade is $100.

No Pattern Daytrader Rule
Yes, if you have a margin account, you will still fall under the PDT. BUT, if you have a cash account, the PDT does not apply to you. Options settle overnight, so get a cash account and don't be restricted by the PDT.

Play The Big Boys
Options allow traders with small accounts to get out of pennyland and trade the big board stocks like AAPL, GOOG, FB, etc.

What Broker Should I Use?

First, I will only give recommendations for brokers that I use and I will give you my honest opinion.

• TD Ameritrade

Commission: $9.99 / flat fee + $0.75 per contract (you can negotiate a much smaller commission)

Trading Platform: ThinkorSwim

Platform Cost: Free

Required Initial Deposit: $50

You will be hard pressed to find a better broker for options trading. TD Ameritrade has fast option executions, their trading platform is free and has special option features that no other platform has. Also, you can negotiate your commission down to below $3.00 without a $9.99 fee. Their best feature is their customer service and their banking features.  

What Are Options?

Stock Option
- A stock option is a contract between two parties (buyer & seller), giving the buyer the right (but not the obligation) to buy/sell 100 shares of the underlying stock at a predetermined price.

Strike Price
- The strike price is the price that the underlying stock is to be bought or sold when the option is exercised.

Expiration Date
- Every option has an expiration date. Once the option expires, the right to exercise no longer exists and the stock option becomes worthless. American style stock options expire on the third Friday of the expiration month. Some stock options have Weekly options, that expire every Friday.

Call
 - A call option gives the buyer a right to buy the underlying stock at the strike price. (Like going LONG on a stock)

 Put
- A put option gives the buyer a right to sell the underlying stock at the strike price. (Like going SHORT on a stock)