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SMART TRADERS

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 CHECKLIST BEFORE YOU START
TRADING OPTIONS
Instructions- Tick for each completed checklist
CHECKLIST 1: UNDERSTANDING OPTIONS
1
Know What Options
Are
As a beginner, you need to clearly
understand the difference between
Stocks and Options.
Options are contracts that confer to
their holder the right to buy or sell an
underlying security at a set price (the
"strike price") within a set time period
(the "term"). The strike price may be
lower or higher than the current
price of the underlying security (the
"market price").
An option, just like a stock or bond, is
security. Options are traded on an
exchange in the US. In simple terms,
Options are traded and listed just like
stocks and have bid and ask prices as
well.
Learn more about options
terminology, the various types of
options that you can trade, exercising
and settling options, tax
considerations for options traders,
and the risks associated with options
trading.
3
2
Understand the risks of
options trading.
Understand the basic
types of trades.
Options can be purchased
speculatively or as a hedge
The first steps to be successful in against losses. Speculative
Options Trading is to know what are purchases allow traders to make
the TWO types of options. a large amount of money, but
only if they can correctly predict
Why is that important? the magnitude, timing, and
direction of the underlying
Because it will give you the security's price movement.
purchase direction.
An option is a contract that says you However, options can also be
have the right to buy or sell an asset used as a strategy to protect
at a certain price at any time before your investments. For example,
a certain date, but you're not using a non-directional strategy
obligated to do so. Options are that provenly protects your
separated into "call" and "put". Both capital regardless of the market
represent the right to either buy or direction.
sell a security at a certain price This method of using options is
within a defined time period. somewhat safe, as you only
stand to lose the contract price
With a call option, you have the
right to buy an asset at a certain
price before a given date. You'd buy
this option if you expected the value
of the asset to rise before that date
so that you could buy it more
cheaply.
A put option is the opposite. You're
purchasing the right to sell an asset,
which would be useful if you
thought the price of that asset
would drop before a given date.
Make sure you take the time to
educate yourself with this basic
knowledge.
SMART TRADERS
 CHECKLIST BEFORE YOU START
TRADING OPTIONS
Instructions- Tick for each completed checklist

CHECKLIST 2: WHAT YOU NEED TO DO BEFORE

YOU START TRADING

1
2
Open a brokerage
account.

If you want to trade options,

you're going to need to open a
Get approval to trade
options. 3
Understand technical
analysis.
brokerage to enter your You'll need to get approval from
transactions. your brokerage house before you
can start buying and selling options. Options are typically short-term
Compare commissions on Brokerage firms want to be sure investments, so you'll be looking for
options trading between customers understand the risks price movements of the optioned
various brokerages. Some firms before trading based on experience security in the near future to earn a
even offer no commissions on and money in an account, and each healthy return. To properly predict
options trading. firm has its own requirements those price movements, you'll need
aimed at ensuring the customer to understand the basics of technical
• Do some online research and
read the reviews of the
knows what he is doing. analysis.

brokerage companies.

• Watch out for scam trading

sites and platforms.

• Understand the account’s

availability for each
purchase/trade

• Ensure that your online

brokerage accepts safe forms
of payment

SMART TRADERS
 CHECKLIST BEFORE YOU START
TRADING OPTIONS
Instructions- Tick for each completed checklist

CHECKLIST 3: GETTING STARTED WITH TRADING

OPTIONS

1
Start with "paper trading." 2
Reevaluate your strategy
periodically.

Avoid the temptation to risk your

hard-earned money on a technique that Determine if there's anything
you just learned. Instead, opt for practice or you can do to improve your
paper trading. Some brokerages give you return. Learn from your
USD100,000 for each paper trading. mistakes, but also repeat
your successful strategies.
Only trade with money you can afford to
lose. Enter "pretend" trades using a
spreadsheet or practice trading software.
Then, evaluate your returns for at least a
couple of months. If you're making a
decent return, slowly work your way into
real trading.

Use limit orders. Avoid paying market

prices for options because the execution
price may be higher than expected.
Instead, name your price with limit orders
and maximize your return.

SMART TRADERS
CHECKLIST 4: DO IT SIMPLE

To understand the whole process before you can start your

1st trade, it will take more time as you expected.

You may spend more time on something that is not really

important- BUT YOU MAY MISS OUT ON HOW YOU CAN
GENERATE YOUR INCOME CONSISTENTLY USING THE
PROVEN STRATEGY.

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