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Stock/Option Trading: Beginner's Edition

All your questions about options answered

finance, investing, options, guide

Q: What is the stock market?

A: The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place. Though it is called a stock market or equity market and is primarily known for trading stocks/equities, other financial securities - like exchange traded funds (ETF), corporate bonds and derivatives based on stocks, commodities, currencies, and bonds - are also traded in the stock markets. (Source: httos://www.investooedia.com/terms/s/stockmarket.aso)

Q: What is a stock?

A: A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation's assets and profits equal to how much stock they own. Units of stock are called "shares." (Source: httos://www.investooedia.com/terms/s/stock.aso)

Q: What are options?

A: Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset. (Source: httos://www.investoDedia.com/terms/o/ootion.aso)

Q: Which brokerage apps should I use to trade? A: The recommended brokerage apps are WeBull, ThinkorSwim, & TDAmeritrade. -httos://www.tdameritrade.corn/tools-and-olatforms/thinkorswirn/webmage -httos://www.webull.com/

Q: What is paper-trading?

A: ThinkorSwim offers paper trading services which allow you to do simulated trading with the option of live or delayed quotes. Great tool for practice and learning how to trade options and stock.

Q: I want to trade. Should I trade stocks or options? (Not financial advice)

A: Trading options contracts involves *more risk* than trading shares of a company (stock) but the returns and the leverage your initial investment has is a lot more significant. Whereas trading shares (stock) is *less risk* involved and the returns are more moderate. Please watch this video: httos://www.youtube.com/watch?v=Vq1 PToVTiOo Other helpful links: -httos://www.investocedia.com/articles/active-trading/093014/Denny-stocks-ootions-and-trading-margin.asa

Q: How much money should/can I start trading with? (Not financial advice)

A: Whatever amount you are comfortable with putting up and not having to make a lifestyle change. Everyone's risk tolerance is very different, that amount can be as low as $50.

Q: I want to trade stocks. What type of stock should I trade? (Not financial advice)

A: There are penny stocks and bluechip stocks. Penny stocks require less capital to start but inquire for a higher risk and greater profit margin. Whereas blue chip stocks require 'more capital* to start but are less riskier and more moderate profit margins. (Source: httos://www.investoDedia.com/uodates/Denny-stocks-risks-rewards/) Other helpful links: -httos://wwwinvestopedia.com/articles/markets/022316/small-cao-vs-mid-caa-vs-large-can-stoc ks-2016.aso

Q: I want to trade options. What type of stock should I trade options on? (Not financial advice)

A: The general criteria for the underlying stock should be: *Around a $18 market cap, around 800k volume, and at least $15/share. Other helpful links: -httos HvAvw investopedia.com/articles/active-trading/111214/nick-right-ootions-trade-six-stelDS.a sp

Q: What's a call? What's a put?

A: A call buyer profits when the underlying asset increases in price. A put option buyer profits as the price of the underlying stock decreases.

Q: What's the difference between day trading vs. swing trading? A: Day trading. as the name suggests, involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems. Day traders do not keep any positions or own any securities overnight. Swing trading is based on identifying swings in stocks, commodities, and currencies that take place over a period of days. A swing trade may take a few days to a few weeks to work out. A trader might choose to be a day trader and a swing trader. (Source: Dav Trading vs. Swing Trading: What's the Difference?) Other helpful links: -httos://www.investopedia.com/articlesitrading/06/daytradingretail.asp

Q: When should I take profit? (Not financial advice)

A: Whatever amount you are comfortable with taking, whether that be a price target the underlying stock is at, certain indicators/studies you might follow for confirmations, or gain percentage (%) if your trading options. If you are trading shares it may be a price target the stock is at, certain indicators/studies you might follow for confirmations, or gain percentage (%) as well. Other helpful links: -httos://www.investopedia.comiterms/e/exitstrategv.aso -httos://www.investopedia.com/articlestactive-trading/022315/when-and-how-take-Drofits-oations .asp

Q: What is PDT?

A: A pattern day trader (PDT) is a trader who executes four or more day trades within five business days using the same account. Traders are required to hold $25,000 in their margin accounts to achieve this designation. (Source: httos://www.investoDedia.com/terms/o/Dattemdaytraderaso)

Q: What is a margin account?

A: A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. The loan in the account is collateralized by the securities purchased and cash, and comes with a periodic interest rate. (Source: httos://www.investopedia.comiterms/m/marginaccount.aso)

Stock/Option Trading: Beginner's Edition
Info
Tags Finance, Investing, Options, Guide
Type Google Doc
Published 30/08/2109, 22:41:33

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