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How to Trade Options: Real Money Pros Explain

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There are plenty of places to make money in markets. Options trading is one of them, but you need some good knowledge, experience and common sense to make it happen in a positive way. Like any career, trading takes time to develop your skills. The hard work is in the training and the practice, and when you finally venture out live with real money, you may suddenly find yourself in a bind.

Options trading is not rocket science; you don’t need a PhD to be successful in trading options. However, there are some basic skills that are required. I spent some time recently chatting with RealMoney Pro contributor and veteran options trader Tim Collins. We discussed the basics one needs to know to trade options successfully and keep out of trouble.

Tim preached a disciplined approach to starting off slowly. There is no shame in taking your time to learn about the mechanics of the options market and experimenting. Tim talked about going small, and taking profits regularly -- whether big or small. Risk management is a critical element in trading options that many seem to forget, so establishing rules is extremely important to save yourself -- from yourself!

Losses are inevitable in trading -- in fact, this might be the one thing many can learn from the discipline of risk management. I asked Tim about the GameStop/WallStreetBets saga, which was an options trader’s dream -- a stock that boasted high implied volatility and crazy option prices, with speculation running wild. Tim noted that this was an example of crazy traders run amok, and there would be many more losers than winners.

That said, options trading can be a profitable venture if done safely and correctly. Tim discussed spreading trades out and using charts/technicals to find the best trade ideas, and how a novice can use these tools to assist them in making great trading choices. 

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