Before drilling down into the steps required to successfully engaging in day trading options contracts, let’s assume you know what an option even is. That you know a put from a call, and perhaps the slang terms for the various combinations of contracts on either side of the strike price that allow you hedge your bet and profit from price movement in either direction.
If you don’t know this terminology, that becomes your first task in this journey. Because the options game is no place for beginners, and at the very least you need to know the names of the various tools, alternatives and strategies you’ll be dealing with.
Your First Coach — You
To gain this knowledge, simply go online and start Googling (or use your search engine of choice). You’ll not only find the definition of these terms, you’ll also find a few actual training programs and practice tools that would be helpful to get you ramped up for this adventure.
Fact is, you’re going to need all the knowledge you can get.
Once you are confident you can hold your own in a conversation about trading options, it’s time to set up the various tools and resources required.
Open An Account
First, you need to open an online trading account. There are dozens of online brokerage firms to choose from, just make sure your select one that provides a real-time data feed from the options exchanges and the stock exchanges, included backlogged bids and offers to assess near-term strength.
You also will need access to various information sources, such as fundamental data on companies, instant trade reporting and account updating, and access to confirmation and tax paperwork as required.
Hardware to House your Software
Once you have this resource selected, you’ll need to make sure you have a computer fast enough and deep enough (both in terms of RAM and hard drive space) to handle what will be a rapid and thick flow of data. Some traders use two computers, one for real-time data monitoring of the markets, the other for quick access to research and opionions, not to mention email if you are in touch with other traders.
A Little Help
There are services out there that, for a fee, with monitor the markets and actually flag buy and sell opportunities for you. If you sign up for this, make sure you have a dedicated computer for it, since you need immediate access for the inputting of trades, and even the time it takes to switch from one program to another can cost you an opportunity.
That said, always proceed with caution when someone else is making the calls. The more you know on your own, the better off you’ll be.
Practice Makes Profit
Next step is to practice making trades before your real money is on the line. This includes trading the stocks themselves, not just the options, and to an extent (in either case) that you are comfortable with how the trading machine works. It is unforgiving and lightning fast, so you need to be confident rather than hesitant.
If any of this intimidates you and you are still thinking of diving in, consider taking a trading class – either online or at a hotel conference room near you – before actually funding your account.
One tool options traders frequently use is software that targets and monitors specific contracts and companies, using criteria (price range and volume) that you determine. This is the same as the online services who flash buy and sell signals for you, only in this case the flagger is right on your hard drive, and you are alone to interpret and act upon what you see.
The Long Road Ahead – Beware of Sharks
The best and final advice, at least if you desire to succeed and can withstand some losses and bad moves until you do, is to hang in there. The learning curve with options day trading is steep, and you are competing against experienced traders (often also called sharks) who already know what you’re trying to assimilate as you go.
Do this right, in this sequence, and you stand a chance. Cut a corner and put your money into the trading market before your ready, and you’ve just served up a helping of shark bait.
