Novice Traders' Notebook  |  OCT 1999

Getting Started With Options by Joe Demkovich and Eugene Theriot

Getting Started With Options Rather than shying away from the complexity of options, stick with some simple basics in exploiting them. You can start paper-trading options despite their daunting reputation for complexity. If you succeed on paper, you’ll have taken the first step to extracting profits from the real market. It’s true that there are many kinds of options, and options terminology is like a foreign language, but professional traders use options for a good reason. We’ll tell you why. But first, yes, you can lose 100% of your investment. Of course, it is theoretically possible to do this by buying a stock, but it just doesn’t happen. Even if you make an incredibly poor choice of equities, you (usually) won’t lose all the value in the next month or two. But it is all too easy to buy an option one week that will be worthless the next. However, options can also be conservative, especially when used in conjunction with equities that you already own.

by Joe Demkovich and Eugene Theriot