Wednesday, April 26, 2006

Option Trading is the Trend

Just Try it!

Option trading volume broke records in 2005. More than 1.5 billion options traded in the U.S. in 2005 which is a 27% increase over 2004.

The option trading is no longer a few special traders’ privilege. Many regular stock players have joined the option market. The market is getting hotter and hotter. More and more people start to talk about “option” just like talk “stock”.

The reason is simple: the options are incredibly versatile instruments. Options let you profit from volatile stocks.

Yes, to know how to trade option, you need to do some homework first. You have to know the procedure to apply and set up your account; to understand a few fancy words and concepts. In the very beginning, it may be a little frustrated. But after a while, you will know that play option is very much alike to trade stocks. You can pretend they are the same somehow. You have to study the stock and do the same analysis anyway.

In fact, I am using the same way to trade both. For conservative reasons, I like to buy the longer expiration options usually. It is just like buying the stock with a few of restrictions.

“In Google and Apple, more than 1.5 calls traded for every put last year as their shares climbed more than 115%. In GM, 2.3 puts traded for every call as the auto maker skidded to a 23-year low as investors rushed to hedge their stock and bond holdings.” --- Barron’s Online

From the above summary, we can see that the option market is a very good reference or index for stock market; and we can also imagine that many ones got big awards from the option market if they bet on the correct direction.

Again, the best way to learn the option trading is to practice it yourselves. After a couple rounds of trade, everything will look easy.

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