SlingShot Options Blog |

Could anybody recommend an online or local (Utah) finance course with a focus on stock and options trading?

Sometimes a local high school (vocational) offers a basic investments or stock market course. There are a lot of books on the stock market. You can check on amazon.com or your local bookstore. The great thing about Amazon is that they have reviews that can be helpful at selecting the right book that matches your needs and skill level. My dad has been trading for years. It is not easy. He started out with buying stocks and mutual funds. He then went onto call options. Now he is doing more with options. (call and put)
I was Series 7/63 licensed (brokers license) and spent 5 years in investments. I received a lot of training in finance and investments. I also have a business degree. I recently took a graduate finance class. It is complex stuff. I see why they get paid the big bucks, these investment professionals.
So keep that in mind. It may take some time to absorb and understand. It’s not perfect.

If you think that you will learn everything you need to know to get started after one class then you might be mistaken unless you are really gifted, which you might be. I’m not. My dad isn’t. He’s read so many books on investing and the stock market over the years. He’s now in an exclusive investment club. He has a lot of friends that have been investors for decades now. He would tell you that he’s not an expert. There is a psychology to the market.

Warren Buffett is the best investor ever. I would read a book that he’s written if you want to make money.

Stocks are subject to high risk. You can make a lot of money but you can lose too. Options trading is even riskier and should only be done by experienced investors because you need a margin account. Not everyone can get a margin account. You need so much capital and again, experience.
You have to understand the risks involved.

I’m sorry if I seem condescending. I don’t mean to at all. I don’t know you and by your question, I can’t tell anything about you. How much experience do you have with investments? Do you have a 401K or IRA?

I don’t know of any online courses unless you go with a college course. Usually finance courses have prerequisites before you sign up. I took an Investments and Security Analysis class at Bentley College after I graduated from college. I took a Managerial finance course a few months ago in an MBA program. It was tough. I learned a lot about options when I was studying for the Series 7 and Foundations in Financial planning exam.

I’ve gone to financial seminars. I know what they are about.

I’m 17 and want to trade stocks/options for a living. I have gone to classes and kind of understood somethings but somethings were still confusing. How long did it take you to understand everything? I want to actually start real trading by the time i graduate which is June 2009.

That is actually a good question and the truth is no single investor understands everything there is to trading. Anyone who tells you otherwise is just full of it. Most of the really successful investors got there because they have become experts in a particular area of trading.

I have studied trading for over 12 years and been trading professionally for 8, but I always find room for improvement.

If you get into this profession, understand that it is a continuous learning process. Studying books and theories is a good place to start, but you will soon realize that when applied to the real market, things can be quite different. Anyone who has been trading for a while has learned that experience is a major factor in their trading success.

Unfortunetly, there is no real shortcut to gaining experience in the markets. It just takes time. You can, and I suggest finding a mentor who is successful at what he/she does and learn from them for a while. They can help you avoid many pit falls that new traders fall into.

If your still 17 when you graduate, you wont be able to trade though. Legally, you need to be 18 to trade, but that shouldnt stop you from learning as much as you can. Continue to build a strong foundation.

It will take time, but if you stick with it, it can be a very rewarding career.

Christian Nago
CEO & Chief Investment Officer

http://www.intrepidtradings.com

I have a demo account with mytrack.com and I have been trading stock options but I want to learn a simply strategy. Any suggestions?

Guy Cohen’s 2 books on options are great for greeting started First is Options made easy. and the second breaks down several different strategies, it’s called the Bible of option Strategies.

About how much would it cost to develop software that could make about 1000 calculations per second, grab dynamic information from the web or another trading platform, and trade derivatives of stocks through a brokerage by itself? Thank you.
These answers are of little help. An estimate from someone that knows about software would be ideal. Thank you.

It would not be cheap. Which is why a previous poster suggested looking at COTS products already on the market.

Here’s some assumptions based on your post:
1) This is a real-time system that acts on the incoming feed and doesn’t have any fancy requirements for historical data.
2) You have some idea for an already existing and proven trading strategy that can be expressed in code.
3) The system is a dedicated workhorse trading plaform that does nothing but trade your strategy (#2 above), so there’s no fancy gui of charts, and library of a zillion technical indicators.
4) You have some other program to report on trades, do PnL reports, etc. The new system will only trade your strategy and generate a simple record in a database for each trade made.

That said there’s three core areas of development:

1) The real-time data feed. Most commercial sources have an API for their streaming data. Although not trivial they usually have plenty of example code. Probably about 2 weeks of time.

2) Implementing your trading system. This is the biggest unknown, just a swag here would be a full 4 weeks.

3) Broker interface, use a pseudo-standard here like FIX. I suggest looking at QuickFIX since its open source and has wide support. This depends on your broker and how well they support FIX. Since this is more an integration issue than a coding issue I go with 4 weeks.

Throw in 2 weeks for testing and debugging and you’re looking at a minimum of 3 man-months or 480 hours.

Assuming you get someone who knows what their doing and not some hack who charges $20 an hour and can barely spell "C#", let alone design a system from scratch, you’re looking at someone in the $100/ hour range.

Round it off and say $50,000

I’ve been programming for 25 years and for 14 of those years had my own software consulting company, so I feel this is probably the minimum to get something up and running.

Of course the other side is the question is why you’d want to do this. I’m assuming your an individual person (retail trader) and not a hedge fund. Have you thought about the latency of trading remotely and the commision costs? The big boys that do this have their trading servers co-located nextdoor to the exchange and are constantly trying to shave 1 or 2 milliseconds off their execution times to beat everybody else into the orderbook. They also strike incredible discount deals on commisisons with their prime brokers that you and I will never see. That’s the big hurdle for a retail trader to try anything like the low-latency, high frequency stuff that you imply.

how do you trade stock options? how does it work exactly, all i know is how to trade stock. helpful links would be appreciated as well as a thorough explanation.. what is the risk and reward. How is it different than trading stocks? thanks

options in a nutshell…..This is an explaination of equity options. Basics – Strike price is the price paid at execution or which intrinsic value is based. Expiration- The date the contract expires. Options have cycled expiration dates, all of which expires on 3rd Saturday of the month. The last day to trade is the third friday of the month. A contract represents 100 shares. There are puts and calls. There are four types of options and depending how ther are initiated they are either bull or bear strategies. Each contract represents 100 shares of the underlying equity. The four are: Long Calls – This is buying the right to purchase a stock at a fixed price within a predetermined period of time. This stategy is most commonly used to control a larger position of a stock then you could by simply buying the stock outright. I will use Intel symbol "intc" in all examples to illustrate. fridays price was 21.50 a share. To buy 100 shares of intel you would need $2,150. However for 1.85 per share or $185 you can control 100 shares of the November 20 Calls. This contract gives you the right to purchase 100 shares of intel @20 between now and Nov. 18th when the contract expires. Notice you have to pay a .35 premium for each share. However, if intel goes to 25 your options would have a minimum value "intrinsic" of $5. Which is a 65% return. When the stock only went up 22%. With long calls your loss is limited to the original invesment…$185. Max gain is theoritically unlimited. There are two ways in which to realize the gain in your position. You can simply sell the option contract for its current value which would be its "intrinsic" or true value plus any time value that still remains. In the example above, if the gain in intel happened the first day of ownership. The option would be worth more than $5 because of the the time premium still remaining. The time value would be less than $.35 You can also exercize you call and purchase 100 shares of intell at $20 per share. You would use this if you wanted to keep the shares for a longer period of time or to delay to the capital gain.
Long Puts- Would be used in the same manor as calls. With puts you are looking for a stock to trade down. Puts give you the right to sell a stock at a fixed price within a fixed time period. With Long puts your loss is also limited to the original investment.

Now Short Options are where the game gets more complicated and should only be used by an experience options investor. Your risks are much greater with short or "naked" options. An easy way to differentiate is with long calls and puts you are the gambler, risking a small amount of money to potentially win big. In selling options you are the booky. However, your capital exposure is much greater. Naked or short calls are the riskiest option strategy. Selling to "open" calls is giving someone the right to buy stock at a fixed price for a certain time period. It is a bearish strategy and you are betting the stock will not go up over time. In return if you are correct you get to keep the premium. Go back to the origianl intel example. If intel trade down below 20 you would get to keep the 185. However if the stock trade above 21.85 the loss matches the difference penny for penny. Stock goes to 25. The short call writer "seller" looses 3.15 per share. The loss is theoretically unlimited . Very risky.

Now shorting or selling "naked" puts is a very useful way to purchase a security at a discount. With short puts you are selling someone the right to sell you their shares at a fixed price. You are committing yourself to purchase a stock. Lets say you wanted to own intel stock. However you think 21.50 a share is a bit pricey. You would be willing to buy intel at 21. Instead of tring to time intel and placing a limit order to buy at 21. You can sell a dec 22.5 put for $1.50. Your cost basis for intel if forced to purchase would be $21 (22.5 less the 1.50 premium you collect for the naked put) If you are wrong about intel and it continues up above 22.5 you get to keep the $1.50. If it trades down below 21 you will still have to pay net 21 per share. But than you own the stock and you can wait as long as you want to see the stock back above your $21 cost basis.

Options are very useful in a more conservative way. They can be used to cover an existing Long or Short position of a stock. Cover calls are used for long equity positions. Covered Calls, in return for giving up the profits above a fixed point you get some down side protection.
A "Married put" is buying a put to place a floor on the loss that can be experience with a long position.