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Anyone know Stock Market software (ThinkorSwim) procedures? Options Trading?

mwd

Power User
I'm messing with paper money in Thinkorswim software, watching youtube vids, trying to learn stock market processes. I bought 1 contract of 100 shares that expires on Feb 21 and it's up 1800.00 bucks as of today. I literally don't know what to do with it. I have watched so many vids about the time I think I understand something I realize I don't .... so confusing.

Do I have to let it expire and buy the contracted underlying stocks? Whereas you would have to have to have all the money for the purchase or do you just sell the 'right' to buy the contract?

I have looked for classes to start learning and there is just nothing around me available in our rural area.

Any recommendations? .... other than don't or buy low sell high.
 

fractalz

Power User
Wrong forum, I think.... I think you need to read up on options. You didn't say which side you bought on... In general, you sell options you buy for profit and hope options you sell expire worthless and you keep the sales price.
 

Mark Cullen

Inspired
If you bought an option, then you’ll need to sell it before it expires.
If the stock price was to stay the same the option would lose value faster and faster up until expiration at which time it would be worthless.
I would say if you’re up $1,800, sell it and be very happy with a nice profit!
 
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Kamil Kisiel

Power User
Unless you're really well researched and have a ton of time on your hands stick to buying ETFs or you will be in for some very painful lessons.
 
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jefferski

Fractal Fanatic
You're up $1800 on one contract? Sell it!! Take the profit!!! (of course, now it's the weekend... see what it opens at on Monday). If you were to let it expire next week, it would become worthless and you'd lose your initial investment.

And then teach me how you did it ;-)
 

BaronVonGrim

Experienced
Options trading is not for beginners, and your not allowed to just sign up with a online broker and immediately begin to trade in options... you will need to qualify... and have funds to cover the call contracts you may buy.... meaning you will need to put the full amount of the price of the stock at the purchase of your contract... of 100 shares And you will only be able to initially buy call option contracts. They will not allow you to buy put option contracts.

You can buy into a fund that shorts the S&P 500 for example, but you wont be allowed to short a position... until you satisfy the criteria.

If you want to buy Tesla...because you believe the share price will increase.. for example.... instead of buying call options..... where you need to place full amount in a separate fund to cover... you might as well just buy the stock if you think it's going up....
Dont get caught up in the concept of limiting your risk buy buying call contracts... until you've become a seasoned investor.... and in context with the OP.... your question is about "buying" options...

You can also "sell" options contracts... if your considering buying option contracts... you need to understand who you are buying them from.... and that they will allow you to do... if you own the stock..
for example... say I own 250 shares of Tesla... and I believe the stock is going to go down... I could sell some call options on say 100 shares of my stock to a guy like you who thinks it's going up... and if it goes down..then your contract expires... and the money you spent... becomes mine...

You should maybe think about day trading...
then day trading call options.... your OP... is more of a longer contract.. which is much different.

you dont have to wait until the contract expires... you can take your profits any time up to the expiration of the contract.

Consider what the annual return is on a good mutual fund.. if your up 30% at $1800... you could be happy with that? knowing when to take profits... is a difficult lesson too
 
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plexi59

Power User
Someone's gonna lose a lot of money. :) You shouldn't get stock advice from a forum full of broke-ass guitarists. In fact, most of the time you get stock advice anywhere, including "reputable" sources, it's bullshit, and someone is trying to scam you out of your cash. Tread very carefully and don't bet more than you can afford.
 

Project Mayhem

Experienced
I'm messing with paper money in Thinkorswim software, watching youtube vids, trying to learn stock market processes. I bought 1 contract of 100 shares that expires on Feb 21 and it's up 1800.00 bucks as of today. I literally don't know what to do with it. I have watched so many vids about the time I think I understand something I realize I don't .... so confusing.

Do I have to let it expire and buy the contracted underlying stocks? Whereas you would have to have to have all the money for the purchase or do you just sell the 'right' to buy the contract?

I have looked for classes to start learning and there is just nothing around me available in our rural area.

Any recommendations? .... other than don't or buy low sell high.
First and foremost, understand that paper trading is in no way indicative of actual market play. I can’t tell you how many self directed clients I have seen over the years get decimated because they never took into account the psychology of trading...which paper trading/simulation platforms completely mask. Timing the market isn’t that difficult...self awareness and self discipline is what separates those who succeed from those who get consumed. I’m my experience, most people don’t understand how they will react under those circumstances, and make decisions from emotion as opposed to logic.

Also understand, the system is designed to profit from you, not for you...The movie “The wolf of Wall Street” is seen as more of a documentary, than entertainment to those who work in the industry. The Hanna speech to Belfort early in the movie is an accurate portrayal of the entire industry.

As others have mentioned, be very wary of selling naked premium, particularly in markets of lower liquidity.
If your going to dabble in options, I would recommend reading Sheldon Natenburgs “Options volatility and pricing strategies” ....this will give you a thorough understanding of all the various strategies as well as the Greeks used in the pricing models.

I always asked potential investors how successful they were at blackjack (assuming a fair game with favorable rules) ... if they couldn’t consistently win over the long term... then they weren’t ready to trade, as both require the same three elements for success: analysis, money management, and self discipline.

I’m not saying it can’t be done, just be fully aware of what your up against... not the least of which is yourself.
 

plexi59

Power User
> Timing the market isn’t that difficult
Bad advice. Timing the market is impossible. Most hedge funds (who employ thousands of PhDs and "genius level" traders at a great expense) fail to outperform S&P500. They also quite obviously fail to time the market, too, because if they didn't, they'd be better than entirely automatic S&P500 funds and ETFs.

It's a gamble. There are tactics that can limit your losses, but it's a gamble nevertheless.
 

BaronVonGrim

Experienced
Timing... is to be defined. On how you trade.
Do you attempt to value hunt... and try time the bottom.... like SVRA. Then.. your timing is defined with that approach..

Or is your timing defined on buying and buying more of a stock that is going up? Like TSLA. Then your timing is defined with that approach.

once sense of time is more foolish than the other... you can hope you just get lucky both times
but it should never be about gambling... all of it.. some of it is fun... and you'll learn from it in some way
 

Project Mayhem

Experienced
Bad advice. Timing the market is impossible. Most hedge funds (who employ thousands of PhDs and "genius level" traders at a great expense) fail to outperform S&P500. They also quite obviously fail to time the market, too, because if they didn't, they'd be better than entirely automatic S&P500 funds and ETFs.

It's a gamble. There are tactics that can limit your losses, but it's a gamble nevertheless.
Actually, it’s great advice from the perspective of the OP who is paper trading, which, logically, leads to self directed trading... you don’t paper trade for a system or managed account.

Impossible? It’s a binary choice. Flip a coin before the market opens each day...it won’t be long before you get it right...doesn’t require a PhD...which is why Joe Q. Public thinks it’s easy when they put together a couple of solid trades on paper, and suddenly a sense (false) of self confidence builds.

The point being, new investors think the only thing they have to get right is market direction...it isn’t. Which is why people always do welI paper trading and firms actively encourage this to develop potential clients and give them this false sense that it’s easy, as indeed it is easy, to correctly make a binary choice on occasion. But its highly misleading (by design) and all part of the process, which is to ultimately to move the speculators deposit into the firms account before they figure it out...the cooking frogs analogy works well here.

I ’ve seen countless people make very high percentage profitable initial positions and fail to show a positive return, because they either don’t have a plan, or more commonly, don’t have the discipline to follow the plan. Getting the position correct initially isn’t the hard part...it’s managing it. In my experience, most individual investors are better served going the system or managed route. In fairness though, my experience is in shorter term highly leveraged markets...not long term buy and hold.
 

plexi59

Power User
Managed is also bad advice, seeing how those "managers" almost universally fail to beat S&P500 (while not failing to deduct their hefty fees every year). For the vast majority of people the best choice is a low cost S&P500 fund or ETF. Just go to Vanguard or Fidelity, open an account, buy the cheapest S&P500 fund and forget you have that money, for 20 years. Up, down, sideways - doesn't matter.

There are a few exceptions (e.g. Renaissance tends to make a ton of money during downturns), but those exceptions don't allow Joe Blow from the street to buy in, and they also fail to perform from time to time. And their fees (5% of total value of assets per year and 44% of the gains) can easily negate much of the benefit even if you could get in.
 

Rich G.

Experienced
"The stock market is a device for transferring money from the impatient to the patient." - Warren Buffett.

A couple years ago I timed the market imperfectly. I dumped a ton into stocks on 9/14/18. Two weeks later a downward spiral happened that cut the value in half in a month. Funny thing about percentages, a 50% drop means it has to rise 100% to break even again. The climb is always tougher than the fall. I rode that coaster down as everything was heading South of the Death Cross. Eventually, everything came back to even and then some. My portfolio is at an all time high now... but I'm thinking off getting of the coaster for a bit. As mentioned, Coronavirus is bad. I don't think things will enter correction territory, but I do think it will set the pace for 2020 to be a flat year with little economic growth.

Disclaimer: I'm not a financial advisor by any means.
 

NeoSound

Fractal Fanatic
Someone's gonna lose a lot of money. :) You shouldn't get stock advice from a forum full of broke-ass guitarists. In fact, most of the time you get stock advice anywhere, including "reputable" sources, it's bullshit, and someone is trying to scam you out of your cash. Tread very carefully and don't bet more than you can afford.
but at $1,800 he's almost up an Axe-Fx III :). and yes, I am a broke ass guitarist :p (but I do have more money than the drummer :p)
 

shemihazazel

Fractal Fanatic
I'm messing with paper money in Thinkorswim software, watching youtube vids, trying to learn stock market processes. I bought 1 contract of 100 shares that expires on Feb 21 and it's up 1800.00 bucks as of today. I literally don't know what to do with it. I have watched so many vids about the time I think I understand something I realize I don't .... so confusing.

Do I have to let it expire and buy the contracted underlying stocks? Whereas you would have to have to have all the money for the purchase or do you just sell the 'right' to buy the contract?

I have looked for classes to start learning and there is just nothing around me available in our rural area.

Any recommendations? .... other than don't or buy low sell high.
I dabbled in Options trading in my 20s.

Key takeaways:

1. Approaching it as a procedure is the first mistake. One can't rely on a single "strategy" regardless of what all the various charlatans online would insist otherwise. Market conditions must dictate one's trades. Markets will crash faster and more chaotically than they rise, ect.

2. Spread trading in various forms is what the online hucksters try to lay out as the "path to financial freedom". They show examples of all these spread trades with 70%-80% chance of turning a profit. This fails to take into account at least two critical factors. First, the potential absolute losses outweigh the absolute gains by 2 to 3 times in most cases. And second, probability of expiration is vastly different from from probability of touching when it comes to your position and setting automatic stop orders.

3. All this to say, options trading is a VERY tricky game, no matter how much technical analysis one applies. When I got out of the game, I was up roughly 20k, which was before the 2008 crash. Not much all things considered with all my losses along the way. If you're determined to trade options, stick to the most liquid ETFs like QQQ and RUT. Options attached to individual stocks carry significantly more risk.

As with all things YMMV.
 
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