How to get started with Options Trading .pdf
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How to get started with Options Trading?
The first and the foremost thing you would require
for options trading is having a trading account with
an options brokerage. Once all the formalities have
been completed and you have an active trading
account, you may choose options trades with your
broker. He will be executing the options trading on
your behalf. You must know the following things to
begin with options trading strategy:
The brokerage firm with which you
plan to set up a trading account will ask you to choose between a cash account and a
The margin type of account let you use your company's current holdings such as stocks
as collaterals to get loaned funds from the brokerage. These can also be used to make
If you opt for a cash account, you must know that to pay for your stock and options
trade you can use only the cash available in your account.
While offline options trading are pretty common, the trend of online brokerage is also
rising at a rapid speed.
Rather than placing your option trades over phone to your offline broker, you can
conveniently do it online. As you place all the information in a single place in a highly
systematic manner, there are very less chances of miscommunication. Moreover, online
brokerage simultaneously handles more option trades than what is possible for a human
broker. With high penetration of internet and advanced technology, online option
trading is possible from everywhere at anytime thus there is great ease.
Also you must know that there are two types of brokers:
Full Service Broker
Full service broker is basically the traditional type brokerage that charges extra for every service related
to the investment planning. This type of broker assist you and guide you before you give a final approval
to any investment proposal. Contrary to this are discount brokers that support the idea of self-directed
trader and let their clients make their own decisions without really interfering in their decisions. They
merely execute the orders you place thus charge money only for the execution, not guidance.
There are several brokerage companies that can be contacted for both these services. They let you
choose the type of broker you would require and charge you accordingly. Working with a company is
better than taking help of an individual broker as an organisation has high legitimacy.